Which of the following is a form of market intervention by the government of India to insure agricultural producers against any sharp fall in farm prices?
Answer & explanation
Correct answer: option 1
The correct answer is Option 1: Minimum support prices
Minimum Support Price (MSP) is a form of market intervention by the Government of India to insure agricultural producers against any sharp fall in farm prices. Minimum price acts as a safety net or insurance for farmers when they sell particular crops. These crops are procured by government agencies at a promised price to farmers and the MSP cannot be altered in any given situation.
Other options explained:
- Price Ceiling: This is a government-imposed maximum price for certain goods, usually aimed at protecting consumers from excessively high prices, not farmers.
- Public Distribution System (PDS): This is a government program to provide subsidized food and essentials to the poor, not directly linked to protecting farm prices.
- Buffer Stocks: These are reserves of food grains maintained by the government, which can be used to stabilize prices, but it's not a direct intervention like MSP.