“A Stock-Trade Policy for National Level Food Security for India”

Citation: Ganesh-Kumar, A. and K. S. Parikh. 1997. “A Stock-Trade Policy for National Level Food Security for India”. Mimeo, Indira Gandhi Institute of Development Research, Mumbai.

Abstract: Food security at the national level requires that adequate amount of food is available at a reasonable and stable price, so that, at that price everyone’s demand would be met. Price stabilization in the light of production variability can be achieved by some combination of buffer stock and trade operations. A critical decision is what is the maximum stock of food grains that one should have in order to stabilize prices through a cost minimising combination of buffer stock and trade operations. In this paper, we attempt to answer this question for rice and wheat for India through a simulation exercise that accounts for variabilities in production, demand and world prices and also the large country effects of India’s trade on the world prices of these two crops. We find that the optimal maximum buffer stock required to stabilize prices is in the range of 4.0 to 8.5 million tonnes for rice and 0.5 to 2.5 million tonnes for wheat. With these levels of stock and supplemental trade it is possible to stabilize domestic prices at minimal cost to the government.

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