CAFRAL-SRU Brown Bag Seminar - Do Price Deficiency Payments Schemes Work?
Speaker(s) Abhinav Narayanan, Manager, SRU, Reserve Bank of India Publication CAFRAL Conference room on Mezzanine Floor, Main Building. Reserve Bank of India, Fort, Mumbai 400 001

Price Deficiency Payments (PDP) scheme is designed to compensate farmers for the price differential between market prices and MSP (or some other benchmark). Bhavantar Bhugtan Yojana (BBY) in Madhya Pradesh recently implemented PDP in 2017-18. Using this quasi-natural experiment, we estimate the impact of this scheme on prices and arrivals. We find that BBY suppressed prices by 5% and increased arrivals by 26% for Urad during this period. Going further, we show how this policy change can be exploited to understand market distortion in agricultural markets in India.