Rabi MSP hike expected to have limited effect on inflation: ICICI Report
Published on 04/10/2025 07:05 PM
The Centre's decision to raise the Minimum Support Prices for six rabi crops is not expected to cause a significant increase in retail inflation, according to a report by ICICI Bank Global Markets, reported by ANI. The government on October 1, announced the new MSPs for the 2026-27 rabi marketing season, increasing support prices between 4 and 10 per cent for key crops such as wheat, barley, gram, lentils, mustard and safflower. With sufficient foodgrain reserves and strong water storage across reservoirs, the bank expects food inflation to remain in check for the rest of the year.
The new MSP for wheat, India’s main rabi crop, has been increased by 6.6 per cent to Rs 2,585 per quintal. Barley is set at Rs 2,150 (up 8.6 per cent), gram at Rs 5,875 (up 4 per cent), lentils (masur) at Rs 7,000 (up 4.5 per cent), rapeseed and mustard at Rs 6,200 (up 4.2 per cent), and safflower at Rs 6,540 (up 10.1 per cent). The Consumer Price Index (CPI)-weighted average increase across these crops stands at 5.6 per cent - lower than 5.9 per cent in 2025–26 and 5.8 per cent in 2024–25.
The report highlighted that the MSPs align with the government’s 2018–19 Budget commitment to offer at least 50 per cent profit over the weighted average cost of production. The margin over cost remains high - 109 per cent for wheat, 93 per cent for rapeseed and mustard, and 89 per cent for lentils.
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This, according to the report, underlines the government’s aim to support farmer incomes while promoting crop diversification, particularly towards oilseeds and pulses. Economists said the move is a continuation of the Centre’s balanced approach to supporting rural earnings without adding to inflationary pressures.
"Muted MSP hikes, good buffer stocks and higher reservoir levels are expected to keep retail prices low in the remainder of the year," ICICI Bank Global Markets said, as reported by ANI. With a normal monsoon and sufficient supplies, food prices are expected to remain stable. The Reserve Bank of India is likely to keep its current policy stance unchanged as inflation stays under control.
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