Which of the following factors/policies were affecting the price of rice in India in the recent past?
- Minimum Support Price
- Government’s trading
- Government’s stockpiling
- Consumer subsidies
Select the correct answer using the code given below :
[amp_mcq option1=”1, 2 and 4 only” option2=”1, 3 and 4 only” option3=”2 and 3 only” option4=”1, 2, 3 and 4″ correct=”option4″]
This question was previously asked in
UPSC IAS – 2020
1. Minimum Support Price (MSP): The MSP sets a floor price. Government procurement at MSP influences market supply and provides a benchmark, impacting open market prices, especially during harvest season.
2. Government’s trading: The government procures, stores, and distributes rice through schemes like the Public Distribution System (PDS). These trading activities (buying and selling/distributing) directly influence the supply available in the open market and hence impact prices.
3. Government’s stockpiling: The level of buffer stocks held by the government affects market expectations about future supply. Large stocks can stabilize prices, while depletion or surplus can lead to price fluctuations.
4. Consumer subsidies: Subsidies on rice distributed through PDS reduce the effective cost for consumers and ensure access for a large population. This influences overall demand dynamics in the market, indirectly affecting open market prices by diverting a portion of demand.