India has raised the price at which the government will buy new-season common rice variety from domestic farmers by 13 percent, a minister said on Wednesday, as the state looks to woo millions of farmers ahead of general elections due early next year.
India, one of the world’s key producers of an array of farm commodities, announces support prices for more than 20 crops each year to set a benchmark.
But state agencies buy only rice and wheat at those prices given a lack of financial resources, limiting the benefit of higher crop prices to only 7 percent of the country’s farmers.
The government had fixed last year’s rice purchase price for the common variety at 1,550 rupees ($22.63) per 100 kilogrammes. It also raised the support price for a superior ricevariety to 1,770 rupees, up from 1,590 rupees last year, Home Minister Rajnath Singh told reporters.
The hike in support prices will not impact on food inflation and the government is confident in reining in rising consumer prices, Singh said.
Prime Minister Narendra Modi’s government vowed in February to buy crops at 1.5 times the cost of production, a major shift after keeping the so-called minimum support price in low single digits over the past three years.
Analysts and economists have warned the move could help push up inflation, and with a fiscal deficit, prompt India’s central bank to raise interest rates more steeply than expected.
Indian farmers voted overwhelmingly for Modi in the 2014 general election, sweeping him to power with an absolute majority, a first for any political party in 30 years. But his popularity has since faded.
Modi’s cabinet also raised the minimum support price for soybean and long staple cotton by 10.3 percent and 20.7 percent to 3,399 and 5,450 rupees, respectively, Singh said.