Q. Which of the following factors/policies were affecting the price of rice in India in the recent past?

(1) Minimum Support Price
(2) Government’s trading
(3) Government’s stockpiling
(4) Consumer subsidies

Select the correct answer using the code given below:

• 1, 2 and 4 only
• 1, 3 and 4 only
• 2 and 3 only
• 1, 2, 3 and 4

Answer: (d) 1, 2, 3 and 4

Notes:

• All the factors/policies mentioned have been affecting the price of rice in India in recent times.
• The Minimum Support Price (MSP) is the price at which the government purchases crops from farmers.
  • The higher MSP would also dent Indian exporters’ competitiveness in the global markets, which have turned to be a buyers’ market.
• The government’s trading and stockpiling policies also have an impact on rice prices. When the government procures rice from the market and maintains large stockpiles, it can lead to a increase in prices. Similarly, when the government releases stockpiles into the market, it can lead to a decrease in prices.
  • The government typically buys more than a third of the country’s rice output at a fixed price, which also has a direct impact on prices paid by traders. With this price rise, the exports will become expensive.
  • Stockpiling usually occurs at times of an actual or expected shortage of a product or in anticipation of a price rise.
• Consumer subsidies also have an impact on prices since they can reduce demand and thus prices. The impact of the consumer subsidy is to lower prices for consumers but to increase the price received by producers.