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:
- A1, 2 and 4 only
- B1, 3 and 4 only
- C2 and 3 only
- D1, 2, 3 and 4Correct
Explanation
All the listed factors significantly influence the price of rice in India:
-
Minimum Support Price (MSP): MSP acts as a floor price for rice. Government procurement at MSP ensures that farmers receive a minimum price, which supports market prices and influences farmers' planting decisions, thereby impacting supply and overall market dynamics.
-
Government's trading: Government agencies, like the Food Corporation of India (FCI), engage in large-scale procurement and distribution of rice. Their buying and selling activities, including open market sales and releases under public distribution systems, directly affect market supply and, consequently, prices.
-
Government's stockpiling: The government maintains buffer stocks of rice for food security and price stabilization. Decisions to build up or release these stocks have a direct impact on the availability of rice in the market and influence price movements.
-
Consumer subsidies: Subsidies on rice (e.g., through the Public Distribution System - PDS) make it affordable for a large section of the population, thereby sustaining demand. Changes in subsidy policies or the effectiveness of PDS can significantly influence market demand for rice and its pricing.
All these factors are direct or indirect mechanisms through which government policies and market interventions affect the price of rice in India.

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