IDEAS home Printed from https://ideas.repec.org/p/ags/aaea14/169808.html
   My bibliography  Save this paper

Modeling Indian Wheat and Rice Sector Policies

Author

Listed:
  • Kozicka, Marta
  • Kalkuhl, Matthias
  • Saini, Shweta
  • Brockhaus, Jan

Abstract

This paper serves to disentangle the complex system of Indian food policies, related to wheat and rice procurement, storage, distribution and trade. Using time series for national aggregate data, these policies are econometrically analyzed, next their implications for the markets are assessed and finally their fiscal costs are estimated. The study revealed strong impact of the policy measures on the production, procurement, stocks and trade. We detected several market distortions and mounting fiscal costs. Wheat and rice supply strongly and significantly responds to the minimum support price (MSP). Wholesale prices at planting or lagged harvest time prices are largely irrelevant for the production. The Food Cooperation of India’s (FCI) procurement volume is driven by the production level and the difference between the MSP and the market price. The signs of the estimated price elasticities of demand are consistent with the theory, however for rice they turned out to be insignificant. The negative income elasticity of rice consumption as well as the downward trend in rice consumption suggest changing habits and the inferior character of rice as a consumption good. The public stock analysis suggests higher storage losses for rice (10%) than for wheat (2%). Strong crowding out effects of the public stocks on private stocks and negative impact of export restrictions on private ending stocks was found. Total exports are highly distorted by the trade regulations, which whipped out the trade response to the price incentives. Starting from 2006/07, there is a clear upward trend in inflation adjusted costs of operating the public food procurement and distribution system, coming mostly from the rising procurement volume and the MSP. On the other hand, the revenues have declined in real terms, due to lower real central issue prices and only marginal revenues from the domestic sales and exports. As a result, the food subsidy has shown a permanent growth in real terms. The seasonal analysis of the intra-year data revealed strong seasonality of prices and procurement and stock levels, in particular for wheat (less for rice).

Suggested Citation

  • Kozicka, Marta & Kalkuhl, Matthias & Saini, Shweta & Brockhaus, Jan, 2014. "Modeling Indian Wheat and Rice Sector Policies," 2014 Annual Meeting, July 27-29, 2014, Minneapolis, Minnesota 169808, Agricultural and Applied Economics Association.
    • Handle: RePEc:ags:aaea14:169808
    DOI: 10.22004/ag.econ.169808
    as

    Download full text from publisher

    File URL: https://ageconsearch.umn.edu/record/169808/files/AAEA%20Indian%20Policies%20paper.pdf
    Download Restriction: no
    File URL: https://libkey.io/10.22004/ag.econ.169808?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. von Grebmer, Klaus & Headey, Derek & Bene, Christophe & Haddad, Lawrence & Olofinbiyi, Tolulope & Wiesmann, Doris & Fritschel, Heidi & Yin, Sandra & Yohannes, Yisehac & Foley, Connell & von Oppeln, Co, 2013. "2013 Global Hunger Index: The challenge of hunger: Building resilience to achieve food and nutrition security," IFPRI books, International Food Policy Research Institute (IFPRI), number 978-0-89629-951-1 edited by von Oppeln, Constanze & Labahn, Marius & Towey, Olive & von Grebmer, Klaus.
    2. Pullabhotla, Hemant & Ganesh-Kumar, A., 2012. "Review of input and output policies for cereal production in Bangladesh:," IFPRI discussion papers 1199, International Food Policy Research Institute (IFPRI).
    3. Ganguly, Kavery & Gulati, Ashok, 2013. "The Political Economy of Food Price Policy: The Case Study of India," WIDER Working Paper Series 034, World Institute for Development Economic Research (UNU-WIDER).
    4. Kym Anderson, 2013. "Agricultural price distortions: trends and volatility, past, and prospective," Agricultural Economics, International Association of Agricultural Economists, vol. 44(s1), pages 163-171, November.
    5. Jha, Raghbendra & Gaiha, Raghav & Pandey, Manoj K. & Kaicker, Nidhi, 2013. "Food subsidy, income transfer and the poor: A comparative analysis of the public distribution system in India's states," Journal of Policy Modeling, Elsevier, vol. 35(6), pages 887-908.
    6. Shikha Jha & P.V. Srinivasan, 1999. "Grain price stabilization in India: Evaluation of policy alternatives," Agricultural Economics, International Association of Agricultural Economists, vol. 21(1), pages 93-108, August.
    7. Williams,Jeffrey C. & Wright,Brian D., 2005. "Storage and Commodity Markets," Cambridge Books, Cambridge University Press, number 9780521023399.
    8. Jha, Shikha & Srinivasan, P. V., 1999. "Grain price stabilization in India: Evaluation of policy alternatives," Agricultural Economics, Blackwell, vol. 21(1), pages 93-108, August.
    9. Kumar, Rajesh & Bagaria, Nidhi & Santra, Swarup, 2014. "Food security: status and concerns of India," MPRA Paper 53286, University Library of Munich, Germany.
    10. Kym Anderson & Maros Ivanic & William J. Martin, 2014. "Food Price Spikes, Price Insulation, and Poverty," NBER Chapters, in: The Economics of Food Price Volatility, pages 311-339, National Bureau of Economic Research, Inc.
    11. Shweta Saini & Marta Kozicka, 2014. "Evolution and Critique of Buffer Stocking Policy of India," Working Papers id:6153, eSocialSciences.
    12. Krishna, Raj & Chhibber, Ajay, 1983. "Policy modeling of a dual grain market: the case of wheat in India," Research reports 38, International Food Policy Research Institute (IFPRI).
    13. Mitchell, Donald, 2008. "A note on rising food prices," Policy Research Working Paper Series 4682, The World Bank.
    14. Dasgupta, Dipak & Dubey, R.N. & Sathish, R, 2011. "Domestic Wheat Price Formation and Food Inflation in India," MPRA Paper 31564, University Library of Munich, Germany.
    15. Jolejole-Foreman, Maria Christina & Mallory, Mindy L. & Baylis, Katherine R., 2013. "Impact of Wheat and Rice Export Ban on Indian Market Integration," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. 150595, Agricultural and Applied Economics Association.
    16. Kavery Ganguly & Ashok Gulati, 2013. "The Political Economy of Food Price Policy: the Case Study of India," WIDER Working Paper Series wp-2013-034, World Institute for Development Economic Research (UNU-WIDER).
    17. Shreedhar, Ganga & Gupta, Neelmani & Pullabhotla, Hemant & Ganesh-Kumar, A. & Gulati, Ashok, 2012. "A review of input and output policies for cereals production in India:," IFPRI discussion papers 1159, International Food Policy Research Institute (IFPRI).
    18. Kumar, Praduman & Kumar, Anjani & Parappurathu, Shinoj & Raju, S.S., 2011. "Estimation of Demand Elasticity for Food Commodities in India," Agricultural Economics Research Review, Agricultural Economics Research Association (India), vol. 24(1), June.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Brockhaus, Jan & Kalkuhl, Matthias, 2015. "Grain emergency reserve cooperation – A theoretical analysis of benefits from a common emergency reserve," 2015 Conference, August 9-14, 2015, Milan, Italy 212767, International Association of Agricultural Economists.
    2. Weber, Regine, 2015. "Welfare Impacts of Rising Food Prices: Evidence from India," 2015 Conference, August 9-14, 2015, Milan, Italy 211901, International Association of Agricultural Economists.
    3. Matthias Kalkuhl & Lukas Kornher & Matthias Kalkuhl & Irfan Mujahid, 2015. "Food price volatility in developing countries – the role of trade and storage," EcoMod2015 8415, EcoMod.
    4. Sudha Narayanan & Nicolas Gerber, 2015. "Social safety nets for food and nutritional security in India," Indira Gandhi Institute of Development Research, Mumbai Working Papers 2015-031, Indira Gandhi Institute of Development Research, Mumbai, India.
    5. Kalkuhl, Matthias & von Braun, Joachim & Torero, Maximo, 2016. "Food Price Volatility and Its Implications for Food Security and Policy," MPRA Paper 72164, University Library of Munich, Germany.
    6. Jan Brockhaus & Jan Brockhaus & Matthias Kalkuhl, 2015. "Drivers of private grain storage. A computational-economics and empirical approach," EcoMod2015 8430, EcoMod.
    7. Marta Kozicka & Matthias Kalkuhl & Jan Brockhaus, 2017. "Food Grain Policies in India and their Implications for Stocks and Fiscal Costs: A Dynamic Partial Equilibrium Analysis," Journal of Agricultural Economics, Wiley Blackwell, vol. 68(1), pages 98-122, February.
    8. Ana Miranda, 2018. "Public food procurement from smallholder farmers: literature review and best practices," Working Papers 176, International Policy Centre for Inclusive Growth.
    9. Brockhaus, Jan & Kalkuhl, Matthias & Kozicka, Marta, 2016. "What Drives India’s Rice Stocks? Empirical Evidence," 2016 Annual Meeting, July 31-August 2, Boston, Massachusetts 235659, Agricultural and Applied Economics Association.
    10. Rahul Anand & Naresh Kumar & Mr. Volodymyr Tulin, 2016. "Understanding India’s Food Inflation: The Role of Demand and Supply Factors," IMF Working Papers 2016/002, International Monetary Fund.
    11. Marta Kozicka & Dr Matthias Kalkuhl & Jan Brockhaus, 2015. "Food Grain Policies in India and Their Implications for Stocks and Fiscal Costs: A Partial Equilibrium Analysis," EcoMod2015 8377, EcoMod.
    12. Kumar, K. Nirmal Ravi, 2022. "Competitiveness of Indian Agricultural Exports: A Constant Market Share Analysis," Research on World Agricultural Economy, Nan Yang Academy of Sciences Pte Ltd (NASS), vol. 3(2), May.
    13. Sudha Narayanan Narayanan & Nicolas Gerber, 2016. "Safety Nets for Food and Nutritional Security in India," FOODSECURE Working papers 37, LEI Wageningen UR.
    14. Kozicka, Marta & Kalkuhl, Matthias & Weber, Regine, 2015. "Public Distribution System vs. Market: Analysis of Staple Food Consumption in India Using QUAIDS with Rationing," 55th Annual Conference, Giessen, Germany, September 23-25, 2015 209243, German Association of Agricultural Economists (GEWISOLA).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Brockhaus, Jan & Kalkuhl, Matthias & Kozicka, Marta, 2016. "What Drives India’s Rice Stocks? Empirical Evidence," 2016 Annual Meeting, July 31-August 2, Boston, Massachusetts 235659, Agricultural and Applied Economics Association.
    2. Tripathi, Ashutosh K. & Mishra, Ashok K., 2023. "Assessing the Relationship between Public Stockholding and Market Price Dynamics: The Case of Wheat Market in India," 2023 Annual Meeting, July 23-25, Washington D.C. 335622, Agricultural and Applied Economics Association.
    3. Weber, Regine, 2015. "Welfare Impacts of Rising Food Prices: Evidence from India," 2015 Conference, August 9-14, 2015, Milan, Italy 211901, International Association of Agricultural Economists.
    4. Marta Kozicka & Dr Matthias Kalkuhl & Jan Brockhaus, 2015. "Food Grain Policies in India and Their Implications for Stocks and Fiscal Costs: A Partial Equilibrium Analysis," EcoMod2015 8377, EcoMod.
    5. K. U. Gopakumar & Vishwanath Pandit, 2017. "Food inflation in India: protein products," Indian Economic Review, Springer, vol. 52(1), pages 157-179, December.
    6. Rashid, Shahidur & Gulati, Ashok & Mahendra Dev, S., 2008. "Parastatals and food policies: The Indian case," IFPRI book chapters, in: Rashid, Shahidur & Gulati, Ashok & Cummings, Jr., Ralph (ed.), From parastatals to private trade: Lessons from Asian agriculture, chapter 3, pages 51-76, International Food Policy Research Institute (IFPRI).
    7. Christophe Gouel & Sébastien Jean, 2015. "Optimal Food Price Stabilization in a Small Open Developing Country," The World Bank Economic Review, World Bank, vol. 29(1), pages 72-101.
    8. Wusheng Yu & Jayatilleke Bandara, 2017. "India's Grain Security Policy in the Era of High Food Prices: A Computable General Equilibrium Analysis," The World Economy, Wiley Blackwell, vol. 40(8), pages 1547-1568, August.
    9. Femenia, Fabienne, 2011. "To Subsidize or Not to Subsidize Private Storage? Evaluation of the Effects of Private Storage Subsidies as an Instrument to Stabilize Agricultural Markets After CAP Reforms," 2011 International Congress, August 30-September 2, 2011, Zurich, Switzerland 114360, European Association of Agricultural Economists.
    10. Ayhan KAPUSUZOGLU & Xi LIANG & Nildag Basak CEYLAN, 2018. "Macroeconomic impacts of global food price shocks on the economy of Turkey," Agricultural Economics, Czech Academy of Agricultural Sciences, vol. 64(11), pages 517-525.
    11. Christophe Gouel, 2012. "Agricultural Price Instability: A Survey Of Competing Explanations And Remedies," Journal of Economic Surveys, Wiley Blackwell, vol. 26(1), pages 129-156, February.
    12. Myers, Robert J., 2006. "On the costs of food price fluctuations in low-income countries," Food Policy, Elsevier, vol. 31(4), pages 288-301, August.
    13. Rashid, Shahidur & Gulati, Ashok & Cummings, Ralph Jr. (ed.), 2008. "From parastatals to private trade: Lessons from Asian agriculture," IFPRI books, International Food Policy Research Institute (IFPRI), number 978-0-8018-8815-1.
    14. Rashid, Shahidur & Gulati, Ashok & Cummings, Jr., Ralph, 2008. "Times have changed: Learning new ways of doing business," IFPRI book chapters, in: Rashid, Shahidur & Gulati, Ashok & Cummings, Jr., Ralph (ed.), From parastatals to private trade: Lessons from Asian agriculture, chapter 9, pages 225-239, International Food Policy Research Institute (IFPRI).
    15. Marta Kozicka & Matthias Kalkuhl & Jan Brockhaus, 2017. "Food Grain Policies in India and their Implications for Stocks and Fiscal Costs: A Dynamic Partial Equilibrium Analysis," Journal of Agricultural Economics, Wiley Blackwell, vol. 68(1), pages 98-122, February.
    16. Anand, Mukesh Kumar, 2016. "Reforming fossil fuel prices in India: Dilemma of a developing economy," Energy Policy, Elsevier, vol. 92(C), pages 139-150.
    17. Thibault Fally & James Sayre, 2018. "Commodity Trade Matters," 2018 Meeting Papers 172, Society for Economic Dynamics.
    18. Sen Gupta, Abhijit & Bhattacharya, Rudrani & Rao, Narhari, 2014. "Understanding Food Inflation in India," MPRA Paper 58319, University Library of Munich, Germany.
    19. Roberts, Michael J. & Tran, A. Nam, 2013. "Conditional Suspension of the US Ethanol Mandate using Threshold Price inside a Competitive Storage Model," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. 150717, Agricultural and Applied Economics Association.
    20. Gilbert, Christopher L. & Mugera, Harriet K., 2017. "The effects of US biofuels policy: A structural break analysis of the WTI pass-through to the corn price," 91st Annual Conference, April 24-26, 2017, Royal Dublin Society, Dublin, Ireland 258646, Agricultural Economics Society.

    More about this item

    Keywords

    Agricultural and Food Policy; Crop Production/Industries; Demand and Price Analysis; Food Security and Poverty;
    All these keywords.

    JEL classification:

    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • H53 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Welfare Programs
    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs
    • Q11 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Aggregate Supply and Demand Analysis; Prices
    • Q18 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Policy; Food Policy; Animal Welfare Policy

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ags:aaea14:169808. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: AgEcon Search (email available below). General contact details of provider: https://edirc.repec.org/data/aaeaaea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.