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 :
- A.1, 2 and 4 only
- B.1, 3 and 4 only
- C.2 and 3 only
- D.1, 2, 3 and 4
Correct answer
Explanation
The correct answer is D, 1, 2, 3 and 4. All four policies shape the market price of rice in India, because the government is the biggest buyer, holder and seller of the grain.
The Minimum Support Price sets a floor below which farmers' paddy is not bought by government agencies, which pushes up the general price level. The government trades in rice through the Food Corporation of India: it buys at MSP, sells in the open market under the Open Market Sale Scheme and controls exports through bans or duties. It stockpiles large buffer stocks, which take grain off the market and can later be released to cool prices. Consumer subsidies through the Public Distribution System supply rice cheaply or free, which lowers open-market demand.
A is wrong because it leaves out stockpiling. B is wrong because it leaves out government trading. C is wrong because it leaves out MSP and consumer subsidies.
Exam tip: Rice price levers = MSP (floor), FCI buying and selling, buffer stocks, PDS subsidy.
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