MSP hike unlikely to boost much rural demand, says Kotak Securities

A hike in Minimum Support Prices (MSP) for the kharif crops were quite subdued on the back of Commission for Agricultural Costs & Prices' estimated cost increases, and it is not a real boost for the rural demand, said brokerage house Kotak Securities in a report.

The Cabinet Committee on Economic Affairs (CCEA) on Wednesday approved the increase in the Minimum Support Prices (MSP) for all mandated Kharif crops for marketing season 2022-23 by 4-9 per cent.

"This (hike) bodes well for keeping inflationary pressures in check. However, rural demand is likely to remain subdued with sentiments being boosted in case of a good monsoon and prospects of a bumper harvest," the report said.

The Commission for Agricultural Costs & Prices-computed input price index for cost of production calculations increased by 6.8 per cent in FY23, which is much lower than expectations which were shaped by sharp price increases in fuel, fertilizers and seeds.

There is a significant business community from India. The Indian community has played a major role in the economic development of the UAE.

The UAE's investment in India is estimated to be around $17-18 billion of which $11.67 billion is in the form of FDI while the remaining is portfolio investment. The UAE is the 9th biggest investor in India in terms of FDI. The UAE sovereign wealth funds invested over $4.12 billion in India during FY 2020-21.

The UAE's investments in India are concentrated mainly in five sectors: services (15.78 per cent), sea transport (8.80 per cent), power (8.34 per cent), construction (infrastructure) activities (7.15 per cent) and construction development: townships, housing, built-up infrastructure and construction-development projects (7.08 per cent).

During the visit of Prime Minister Narendra Modi to the UAE in August 2015, it was decided to establish UAE-India Infrastructure Investment Fund, with the aim of reaching a target of $75 billion to support investment in India's plans for rapid expansion of next generation infrastructure, especially in railways, ports, roads, airports and industrial corridors and parks.

During the successive high-level visits, the leaders of both the countries reviewed the progress in realising the target for UAE investments in India. (IANS)

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