Price Movements for Rice and Wheat: A Structuralist Policy Perspective

K. U. Gopakumar and Vishwanath Pandit
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K. U. Gopakumar: Sri Sathya Sai Institute of Higher Learning, Andhra Pradesh, India
Vishwanath Pandit: Sri Sathya Sai Institute of Higher Learning, Andhra Pradesh, India

Indian Economic Review, 2014, vol. 49, issue 2, 227-244

Abstract: Persistent increase in food prices and its impact on society and economy have been of prime concern for the government and policy makers in India since 2005-06. Though these rates have eased to some extent in the recent months; with expected recovery of the economy and inherent supply bottle necks, the problem of inflation is still serious. This paper examines the price movements in rice and wheat, following structuralist principles emphasizing the necessity of long term perspective in combination with short and medium term management. However, unlike a completely free market economy, market for these products is characterized by government interventions, calling for a slightly different approach where interactions of demand and supply need to incorporate government interventions by way of minimum support price and procurement. The sample for our study covers data from 1980-81 through 2011-12 on an annual basis. The results from the model confirm a strong impact of demand and supply factors in determining inflation for both the products. The role of government interventions are found to be effective in ensuring price stability.

Keywords: Foodgrain Inflation; Demand and Supply Management; Procurement; Minimum Support Prices; Capital Stock (search for similar items in EconPapers)
JEL-codes: E31 Q11 Q18 (search for similar items in EconPapers)
Date: 2014
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