- Impact on Inflation:
- Can keep prices of essential food grains (wheat, rice) low for consumers.
- However, MSP-based procurement can distort cropping patterns.
- This can lead to supply-demand mismatches for other crops, causing their prices to rise.
- Impact on Fiscal Discipline:
- Food subsidies entail significant economic cost for the central government.
- This includes procurement at MSP, storage, transportation, and distribution.
- Consumer subsidy (economic cost - CIP) and buffer subsidy add up to total food subsidy.
- This creates a substantial financial burden on the exchequer.
- Contributes to a higher fiscal deficit.