In this week’s newsletter, we talk about the economics of Minimum Support Price, how and whys of a BRICS common currency, a question about dustbins and a lot more.
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An explainer on MSP and the farmers’ protest
Farmers from Punjab, Haryana and Uttar Pradesh have all been marching towards Delhi. Their demand — a Minimum Support Price (MSP) for their crops!
But what’s the deal with MSP, you ask?
Okay, so imagine that farmers have a bumper harvest. Crops are bountiful. And while you might think that’s great for the farmers, you would be wrong. What happens when there’s an oversupply of a commodity, but demand remains the same? Price will fall, right? So when farmers try to sell their produce, they hit a roadblock. Often, the excess supply will push prices so low that they may not be able to even cover their cost of production. They’re better off destroying the crops rather than paying additional charges to transport them for sale.
To counteract such situations where farmers face losses, the government introduced* something called MSP. The idea was simple — every year, they’d buy certain crops from the farmers and store them for later use. And they would do this for 22 mandated crops. These crops would be distributed under various ration schemes. Or the government would keep it for a rainy day, say when a bad monsoon hurts crop supply.
But how would this MSP be calculated?
There’s a whole host of parameters. There’s the production cost for a crop which includes seeds, fertilisers, labour, machinery and fuel. It takes into account the value of family labour. And also, an approximate rental value of the land.
And by factoring in these costs and offering farmers a minimum price, they’d be protected from market losses. At least, in theory.
But here’s the thing. The MSP procurement isn’t codified under any law. So the government can turn their back on it at any point in time. Sure, you could argue that they won’t since there will be political repercussions, but it’s still possible.
And that’s the primary demand of the protesting farmers. They want a law enacted around MSP.
One reason for that could be because an MSP doesn’t mean the government ends up buying all the produce. It buys a limited quantity based on how much it can store and distribute within the country. And that also majorly benefits two crops ― wheat and rice. So the folks farming the other crops can still often be left in a lurch.
So here’s a question to think about ― Is legalising MSP a feasible idea?
Well, it’s not an easy answer, so let’s look at the arguments from both sides.
For starters, most media reports will tell you that only about 6% of farmers in the country benefit from MSP. Now even if that’s a poor estimate, other figures peg it at 15%-25%.
And that still doesn’t seem like much. Because agriculture is still at least 15% of India’s GDP. And it generates employment for close to half of its population. So without adequate support, farmers may lose money, they may end up in a debt spiral, and many of them might even be forced to leave farming altogether.
That won’t bode well for our economy, no?
Also, an MSP guarantee will likely help with crop diversification.
Just think about it. If the government only favours procurement of paddy and wheat simply because they need more of it to supply food to the poor, farmers will switch to producing only those crops. It could take a toll on the environment as paddy is a water-guzzling crop.
Add to that the fact that both crops contribute heavily to stubble burning in the north because they leave residue in fields which need to be cleared before the next sowing season, and it’s a perfect recipe for environmental havoc.
So yeah, MSP could encourage farmers to grow a variety of crops, especially since the government wants to focus on growing millets.
But there’s the flipside too.
If MSP is legalised, that will mean no one can pay less than MSP to buy a crop. And that will distort the demand-supply scene. At least that’s what Ashok Gulati, a leading agricultural economist, suggests. His argument is simple — If there’s an oversupply of crops in the market and prices fall, people still have to buy crops at the minimum price set by the government. Anyone buying at prices below the legal MSP could face legal action.
Another thing that you can’t ignore is how much a guaranteed MSP law will cost the government. The government could end up spending anywhere between ₹6–₹9 lakh crores with a law like that. That is around the annual average government spending on infrastructure development over the last 7 years. It could take a toll on the government’s coffers and it may be left with no money for other developmental activity. And all of that seems quite impractical.
So, what’s the solution then?
Well, some folks suggest that we let the farmers sell their crops in the open market. And if that ends up being lower than the MSP the government calculates, then the government could compensate them for the difference between the two values. That will not only reduce the monetary burden but also free up the need for building massive infrastructure for storage.
But mind you, people have already found a way to scam this system. In 2017, the government of Madhya Pradesh experimented with a similar plan. But it soon realised that traders had found a way to rig prices and show crops trading at prices below an average set price. It was a way to fleece the government.
So that’s why a few others say that direct income support to farmers is better. Say a fixed amount of money based on their landholding to carry on with their livelihood. There’s already a scheme called PM-Kisan that does this, so it’s about extending it even further.
Now we don’t know how this will turn out. But it looks like the MSP debate will be stuck in limbo for a while now. One can only hope for an amicable solution to emerge soon.
Can the BRICS have a common currency?
India is amidst a tug of war. And by that we mean that it’s right in the middle, being pulled by two contrasting decisions.
- Should it warm up to the idea of having a common BRICS currency?
- Or, should it be indifferent to the whole idea of it?
So BRICS is simply an alliance of the world’s developing economies. It was actually kickstarted by Brazil, Russia, India, and China back in 2006 because they felt intimidated by the dominance of goliath economies like Europe and the US. A few years later, South Africa jumped in, forming a global economic group that was determined to challenge the world’s wealthy economies. And now BRICS has expanded its membership with 5 more countries (Saudi Arabia, Iran, Egypt, Ethiopia and the United Arab Emirates) on board.
But the BRICS don’t want to only discuss how they can improve their trade relations. They want a common currency to rally around. Or at least, that’s what Russia wants.
When Russia invaded Ukraine, economies in the West slapped it with trade sanctions. They didn’t accept a bunch of goods from Russia and denied non-essential exports to the country. They even froze deposits and reserves the Russian government, companies and its citizens had with them so that they wouldn’t be able to withdraw and use this money to fund their war.
This obviously crippled Russia’s economy.
So Russia had a brainwave. It thought “Hey, what if we get the BRICS member countries to agree to a common currency? It could act as a global reserve currency. Why should currencies like the US Dollar have all the fun?”
You see, the US Dollar (USD) has dominated reserves worldwide since 1944. Most countries want to hold reserve money in the form of the USD simply because that’s the currency in which most global goods are traded. So if a country wants to buy or sell commodities like coal, gold or oil, it happens in the USD. Roughly 80% of global trade and around 60% of global reserves are held in USD.
The US pretty much controls everything!
So it seems like having a common currency for emerging economies is a great plan, right?
Okay, but why can’t these countries simply conduct trade using their local currencies?
Let’s take the example of Russia and India.
When Russia was locked out of the global financial system during the war, they started selling oil at a deep discount. India jumped in and we consummated the transactions using Rupees.
But what would Russia do with billions of Rupees? The exchange only works if Russia has a massive need for Indian goods and services. It’s the only way they can put the Rupees to good use. And pretty soon, Russia didn’t want our Rupees anymore. They couldn’t use it to trade with other countries either because of certain restrictions.
So yeah, maybe a common BRICS currency makes sense for India too. And maybe that’s why the government seems amenable to even discussing it.
But hold on, we have to talk about the elephant in the room — China!
See, China has been trying to fight the USD’s global influence in every way it can. Over a decade ago it shouldered the responsibility of establishing the headquarters of BRICS’ New Development Bank at a swanky skyscraper in Shanghai. Think of it as a bank for funding infrastructure projects and handing over loans to emerging countries without having to bow down to the USD.
It even launched CIPS (Cross-Border Interbank Payment System) its own global payments messaging platform that would challenge the SWIFT (Society for Worldwide Interbank Financial Telecommunications) as a global messaging system used to facilitate transactions between banks across national borders. As of 2023, SWIFT handled a mammoth $150 trillion in transactions per year, which is only set to rise at a fast clip. And since 7 out of 10 of these transactions happen in the USD and Euro, China’s instinct to challenge these currencies only gets stronger.
And some experts argue that moving to a common currency would benefit China. They’re the largest BRICS economy. Their yuan already has a place as a reserve currency. And at the end of the day, that means they’ll call the shots for a common currency.
What does that mean?
Well, let’s look at the Eurozone. It has taught global economies that common currencies can be a recipe for disaster simply because a single currency has to take care of monetary policies across different countries. When the Global Financial Crisis threatened the world economies in 2008, countries like Greece and Portugal suffered the aftermath in Europe. And that’s because countries like Greece needed to have more liquidity to repay debts. So the European Central Bank would simply have to print more money or take other steps that would help Greece. But that would hurt big economies like Germany where more money would mean skyrocketing inflation. So the big ones eventually called the shots.
India wouldn’t want such a situation, no?
But the bigger problem is — how will a bunch of economies across world borders, with really nothing in common even be able to work together? If you ask, Jim O’Neill, the Goldman Sachs economist who coined the BRIC acronym, he’ll say
It’s just ridiculous. They’re going to create a Brics central bank? How would you do that? It’s embarrassing almost.
So yeah, it does seem to be a far-fetched idea for now. And we’re not sure why the latest chatter says India is even considering it — unless maybe… they can get China kicked out of this plan?
Even that sounds ridiculous, doesn’t it?
Today’s Discussion 
: Duolingo’s Unhinged Marketing Strategy
Y’all, we’ve gotta talk about Duolingo’s marketing because it is WILD. Their social media strategy is unhinged— and we’re vibing!
(Okay okay this doesn’t sound like us. We just wanted to try something new )
See, Duolingo’s social media presence completely breaks the mould and sets a new standard for quirky, entertaining brand personalities.
The cute (& sometimes creepy) Duo mascot guilt trips you into learning French and even threatens you when you skip practice. This bizarre tone embodies IDGAF marketing vibe.
Not only this but Duolingo’s sassy notifications rub some users the wrong way. But instead of softening their tone, Duolingo leaned into the divisive feedback.
When users made “evil Duo” memes portraying the owl mascot as a murderous villain, Duolingo jumped on board. They started sharing even darker Duo memes across social media.
By embracing the creepy jokes, Duolingo amplified their brand’s unhinged persona.
Well, that strange vibe carries over to their social posts as well.
Take their TikTok. It grew 40X in just 5 months. How?
Off-the-wall sketches, crackhead energy, and leaning into every cringey meme trend out there.
Same story on other platforms. They rack up millions of followers thanks to bonkers content. And the craziest part?
Their engagement is wild. Duolingo’s posts get widely shared and liked because they’re genuinely entertaining. Not many brands can pull that off authentically.
So what’s the takeaway here?
Have a personality! Don’t be afraid to show your weird side. Lean into your quirks. Entertain people above all else.
Duolingo breaks all the rules…and ends up winning anyways.
What do you think? Tell us
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#AskFinshots 
This week’s question comes from Samarth. He asked-
“Is it just me or does the Finshots logo look like a dustbin lol”
Hey Samarth, valid question! Here’s what Shrehith, our co-founder had to say—
“Okay, first things first— it wasn’t an unpaid intern screwing things up. We actually reached out to a talented freelance artist who did this for us.
However, the “brief” we gave him had some issues. Now initially, we wanted him to design a logo that resembled a “Starbucks” coffee cup. The idea was simple— Finshots sends out a story every morning piping hot. So the coffee cup made sense.
We also told him to incorporate the words “Finshots” into the logo design. Now obviously, this was easier said than done, but he came up with a very creative solution.
See the “F” and the “S” outlined in red. That’s the “F” and “S” in FinShots.
And when he produced the first working draft, obviously we were ecstatic. It was everything that we asked for. Truth be told, none of us saw the dustbin. We only saw the coffee cup.
Or maybe it’s like this— Once we were primed to see something, we were never going to see anything else
And so the logo went into production. But almost instantly we realised that everybody was seeing a dustbin instead. It was a nightmare. We were panicking for days. However, since we were starting up, we simply didn’t have the bandwidth or the resources to fix it at the time.
The only thing we could do was panic some more.
But then something happened. A young boy wrote to us saying— “I don’t know if you know this. Your logo looks like a dustbin. But it’s the most beautiful dustbin I’ve ever seen. Because Finshots is everything. I love you guys”
And suddenly I remember feeling a thousand pounds lighter
He was right. It didn’t matter that our logo looked like a dustbin so long as we had a good product.
4 years on, it’s still an enduring symbol to keep reminding us one thing— “Focus on the damned product. Everything else will fall in place. And sometimes if you’re lucky, maybe the dustbins can make for a great story!”
Hope that answers your question, Samarth.
Oh and by the way, you aren’t the first one to ask us this. It’s actually our most asked question!
And that’s all for today folks! If you learned something new, make sure to subscribe to Finshots for more such insights 🙂
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