Question 85 from UPSC CSE 2020 - ECONOMICS

Question

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.

IASCODEX · Accepted Answer

Correct Option: D. 1, 2, 3, and 4

Strategy: The strategy is to identify how specific factors influence rice prices, whether through demand, supply, or price controls. This involves evaluating:

*   **Minimum Support Price (MSP)**: Establishes a price floor, directly affecting market dynamics.
*   **Government trading**: Shifts market supply and demand.
*   **Government stockpiling**: Also shifts market supply and demand.
*   **Consumer subsidies**: Alter effective demand by making rice more affordable.

All four processes are recognized influences in economic policy discussions on agricultural markets, confirming their impact on rice prices.

Key Info: ## Key Rice Market Interventions

*   **Minimum Support Price (MSP)**
    MSP is a government-declared minimum procurement price at which crops are bought directly from farmers. For rice, MSP:
    *   Incentivizes farmers to produce more.
    *   Ensures price stability.
    *   Can raise open market prices by absorbing part of the marketable surplus.

*   **Government Trading**
    Includes both imports and exports by government agencies.
    *   Increased exports (or bans) adjust domestic supply.
    *   Directly affects domestic prices.

*   **Government Stockpiling**
    Refers to buffer stocks maintained by agencies like the Food Corporation of India (FCI). These stocks are used to:
    *   Ensure food security.
    *   Stabilize prices during shortages.
    *   Release stocks in case of price spikes.
    Domestic prices can be influenced by stock levels due to changes in available supply.

*   **Consumer Subsidies**
    Such as those delivered via the Public Distribution System (PDS). These subsidies:
    *   Lower the effective retail price for consumers.
    *   Increase affordability.
    *   Influence demand for market rice versus subsidized rice, affecting prevailing prices.

Collectively, these intervention mechanisms shape both the supply and demand sides of the rice market, thereby influencing its price movements in the short and long term.

IASCODEX · Answer

Option A: 1, 2, and 4 only

IASCODEX · Answer

Option B: 1, 3, and 4 only

IASCODEX · Answer

Option C: 2 and 3 only

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.

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.