Input-Output Price Parity and Farm Profitability: A Strategic Perspective for Karnataka

TL;DR

This paper examines how input-output price parity affects farm profitability in Karnataka, highlighting the importance of strategic support prices to stabilize incomes amid rising input costs.

Contribution

It provides an analysis of price dynamics and profitability for cereals, proposing strategic price adjustments to enhance farm income stability.

Findings

Rising input costs reduced profitability for Jowar and Ragi.

Strategic MSP increases of 60% for Jowar and 46.24% for Ragi are recommended.

Average TFP growth was 1.041% annually.

Abstract

Agricultural pricing policies are crucial for farm profitability and food security in India. This study analysed how input and output prices significantly influence the profitability of cereals in Karnataka, with the strategic support prices playing a crucial role in maintaining the price parity. The average annual TFP growth was 1.041 per cent. Rising input costs, particularly for human labour, led to reduced profitability for Jowar (6.12 per cent) and Ragi (4.89 per cent). The net effect was adverse for Jowar (-1.50 per cent) and Ragi (-0.86 per cent) due to rising input costs outpacing output prices. The study recommended increasing the MSP for Jowar (60 per cent) and Ragi (46.24 per cent) above the existing levels. A strategic price adjusted for changing input costs can stabilise farm incomes and promote sustainable production, enabling efficient pricing policies.