Which of the following are the negative effects of the increase in the MSP?

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An increase in the burden of subsidy on the government treasury.

High transportation and storage costs of FCI.

Maintenance cost increases

All of the above

answer is D.

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Detailed Solution

An increase in the subsidy burden on the government treasury, High transportation and storage costs of FCI and Maintenance cost increases are the negative effects of the increase in the MSP. The minimum support price is the price set by the government of India to ensure that the agricultural products are bought at this price if the open market price is less than the cost. And if the price of the MSP increases, it has some negative effects too, which are as follows:

If the price of food grains increases, then the FCI's transportation and storage costs will also increase.

The burden on the government treasury will increase for subsidies.

Maintenance costs will also increase for the food grains.

Farmers will shift their cultivation from coarse crops to the production of wheat and rice because these crops are covered in MSP.

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