UPSC Prelims 2020 Q63: Indian Economy – Agriculture & Rural Development
- (a) 1, 2 and 4 only
- (b) 1, 3 and 4 only
- (c) 2 and 3 only
- (d) 1, 2, 3 and 4
Answer: (d) 1, 2, 3 and 4
Explanation
Rice Prices in India: Factors Affecting Cost
| Factor | Affects rice price? |
|---|---|
| 1. MSP (Minimum Support Price) | YES |
| 2. Government trading | YES |
| 3. Government stockpiling | YES |
| 4. Consumer subsidies | YES |
All four factors influence rice prices:
1. MSP: Government guarantees minimum purchase price -> supports farmer incomes + affects market floor price
2. Govt trading: NFSA, OMSS operations affect supply/demand in market
3. Stockpiling: Building buffer stocks reduces market supply -> affects prices
4. Consumer subsidies: PDS (Public Distribution System) distributes rice at subsidized prices -> depresses market prices
Answer: (d) 1, 2, 3 and 4 - all four affect rice prices.
Why each option is right or wrong
- (a) Incorrect. Incomplete - all four factors affect price.
- (b) Incorrect. Incomplete - factors 2 and 4 also matter.
- (c) Incorrect. Incomplete - factors 1 and 4 also matter.
- (d) CORRECT. All four - MSP, government trading, stockpiling, and consumer subsidies - affect rice prices.
Key point
Rice price drivers: MSP (supply-side), govt trade (demand-side), stockpiling (supply shock), subsidies (demand shock). All interact to determine market price.
Remember
Rice prices in India in recent past have been affected by all four factors: (1) Minimum Support Price guarantees, (2) Government trading and market intervention, (3) Government stockpiling for food security, and (4) Consumer subsidies through the Public Distribution System (PDS).
Common mistakes
- Assuming MSP is only factor. Multiple policy levers work together.
- Missing stockpiling's deflationary effect - large buffers reduce market shortage.
- Underestimating PDS subsidy impact - ~75M tonnes distributed annually at subsidized rates.
Exam tip
India's food policy: MSP supports farmers; PDS protects consumers. Conflict: higher MSP inflates costs (pushing up taxes/subsidies). Rice prices volatile post-2008 (global shortage). India banned exports 2007-11.
Sources
- Ministry of Consumer Affairs - Food Policy
- CEIC - India Rice Price Drivers