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UPSC Prelims 2020 Paper-1 📅 04 Oct, 2020

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
Result Summary
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UPSC Prelims
2020 • 04 Oct, 2020 • Paper-1
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:
Correct Answer
1, 2, 3 and 4
MSP Impact: The Minimum Support Price creates a definitive baseline floor price in the open market. When the government raises the MSP, open market prices for r......
Ref/Book : UPSC Prelims 2020
Ref. Subject Economy
Chapter -
Ref. Topic Agriculture Pricing
Pg. No -
💡 Analysis & Explanation
MSP Impact ▼
The Minimum Support Price creates a definitive baseline floor price in the open market. When the government raises the MSP, open market prices for rice naturally escalate to match or exceed it.
Trading and Procurement Dynamics ▼
Government trading operations (such as aggressive procurement by the Food Corporation of India) directly influence market liquidity. Removing massive quantities of grain from the free market tightly regulates available supply and consequently drives up market prices.
Stockpiling Effects ▼
Strategic stockpiling inside FCI godowns creates an artificial scarcity in wholesale agricultural markets, keeping the open market equilibrium prices elevated.
Consumer Subsidies Mechanism ▼
Distributing subsidized grain through the Public Distribution System (PDS) alters total consumer demand dynamics, forcing private traders to adjust retail prices accordingly.
Conclusion ▼
All four listed macroeconomic factors intricately manipulate and affect the ultimate market price of rice.
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