Managing Food Price Volatility in a Large Open Country : The Case of Wheat in India
India has pursued an active food security policy for many years, using a combination of trade policy interventions, public distribution of food staples, and assistance to farmers through minimum support prices defended by public stocks. This policy...
| Main Authors: | , , , |
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| Format: | Working Paper |
| Language: | English en_US |
| Published: |
World Bank, Washington, DC
2016
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/2016/02/25860944/managing-food-price-volatility-large-open-country-case-wheat-india http://hdl.handle.net/10986/23728 |
| Summary: | India has pursued an active food
security policy for many years, using a combination of trade
policy interventions, public distribution of food staples,
and assistance to farmers through minimum support prices
defended by public stocks. This policy has been quite
successful in stabilizing staple food prices, but at a high
cost, and with potential risks of unmanageable stock
accumulation. Based on a rational expectations storage model
representing the Indian wheat market and its relation to the
rest of the world, this paper analyzes the cost and welfare
implications of this policy and unpacks the contribution of
its different elements. To analyze alternative policies,
social welfare is assumed to include an objective of price
stabilization and optimal policies corresponding to this
objective are assessed. Considering fully optimal policies
under commitment as well as optimal simple rules, it is
shown that adopting simple rules can achieve most of the
gains from fully optimal policies, with both potentially
allowing for lower stockholding levels and costs. |
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