- Market Dynamics:
- MSP becomes the base price in the market.
- If market prices are above MSP, government may not procure.
- If market prices fall below MSP, government procurement kicks in.
- Can lead to deficits and surpluses if not aligned with demand.
- Deters private investment by restricting free market play.
- Crop Patterns:
- Farmers are incentivized to grow MSP-supported crops (e.g., wheat and rice).
- This leads to under-cultivation of non-MSP supported crops (pulses, oilseeds, onions).
- Causes supply-demand mismatch and price volatility for non-MSP crops.
- Leads to monoculture in some regions (e.g., Punjab and Haryana).
- This can cause environmental problems like water extraction and soil degradation.