In keeping with the promise made in this year’s Budget speech, the Union Cabinet has approved a hike in minimum support prices (MSPs) for kharif crops so that they are 50% higher than the cost of production, not including land costs.

This includes a ₹200 per quintal increase in the MSP for paddy, which is likely to inflate the food subsidy bill by over cost the government more than ₹15,000 crore.

The decision was taken by the Cabinet Committee on Economic Affairs headed by Prime Minister Narendra Modi, who tweeted that this was a “historic increase.”

In a press briefing, Home Minister Rajnath Singh said the hike would boost farmers’ income and purchasing capacity, and have a positive impact on the wider economy, even as he played down fears of rising inflation due to higher food prices.