India's Grain Security Policy in the Era of High Food Prices: A Computable General Equilibrium Analysis

Wusheng Yu and Jayatilleke Bandara

The World Economy, 2017, vol. 40, issue 8, 1547-1568

Abstract: This study uses a computable general equilibrium model to evaluate the fiscal and welfare costs of the market stabilisation and insulating food policy of India during the 2007–08 global food crisis. We demonstrate that domestic food grain price stabilisation through simultaneously subsidising consumers and producers and restricting exports entailed huge fiscal costs and equally large welfare costs to India, an outcome that is almost always the worst as compared to the alternative policy mixes examined in this study. While the most market†oriented domestic and trade policy alternatives that would generate better welfare effects and the least fiscal costs may not be feasible due to political economy considerations, we argue that there exist some ‘middle†ground’ policy mixes featuring partial relaxations of domestic subsidies on either food grains or fertilisers and/or less restrictive border policies, which are superior in terms of their welfare effects and fiscal costs and might also be politically feasible. These findings have important implications on the ongoing debates on India's food security policy, particularly in relation to the discussion on its National Food Security Act.

Date: 2017
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https://doi.org/10.1111/twec.12383

Related works:
Working Paper: India’s Grain Security Policy in the Era of High Food Prices: A Computable General Equilibrium Analysis (2015)
Working Paper: India’s grain security policy in the era of high food prices: a computable general equilibrium analysis (2014)
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