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Impact of India’s National Food Security Act on domestic and international rice markets

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  • Debnath, Deepayan
  • Babu, Suresh Chandra
  • Ghosh, Parijat
  • Helmer, Michael

Abstract

Policy making in food security is at a crossroads in India, particularly for the rice crop. Whereas India has emerged has a leading rice exporter over the last two years, the government has also introduced a large food subsidy program called the National Food Security Act. The program requires that 33.6 million metric tons of rice per year be distributed to the marginalized rural and urban populations of the country. In this study, we analyze the long-term impact of India’s Food Security Act on its domestic rice market and the international market for rice. We specify and apply a structural demand-and-supply model to India’s rice market and link it with the world rice market, as part of a broad partial equilibrium modeling system of international agriculture commodity markets. We specifically focus on three different scenarios—subsidy as a price effect, subsidy as an inelastic income effect, and subsidy as an elastic income effect—under the broader framework of the National Food Security Act. We find that at the end of the projection period (the 2024/2025 crop year), as a result of the rice subsidy program, the consumption of rice increases significantly by 6,831 thousand metric ton (MT) in the case of the price effect while the inelastic income effect has little on production, consumption which increase by 265 thousand MT and 269 thousand MT, respectively and no impact on rice export of India.

Suggested Citation

  • Debnath, Deepayan & Babu, Suresh Chandra & Ghosh, Parijat & Helmer, Michael, 2017. "Impact of India’s National Food Security Act on domestic and international rice markets," IFPRI discussion papers 1635, International Food Policy Research Institute (IFPRI).
  • Handle: RePEc:fpr:ifprid:1635
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    References listed on IDEAS

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    1. Ramaswami, B. & Balakrishnan, P., 2002. "Food prices and the efficiency of public intervention: the case of the public distribution system in India," Food Policy, Elsevier, vol. 27(5-6), pages 419-436.
    2. Christopher Gilbert & Wyn Morgan, 2010. "Has food price volatility risen?," Department of Economics Working Papers 1002, Department of Economics, University of Trento, Italia.
    3. Goyal, S.K. & Singh, J.P., 2002. "Demand Versus Supply of Foodgrains in India: Implications to Food Security," 13th Congress, Wageningen, The Netherlands, July 7-12, 2002 6948, International Farm Management Association.
    4. Ahluwalia, Deepak, 1993. "Public distribution of food in India : Coverage, targeting and leakages," Food Policy, Elsevier, vol. 18(1), pages 33-54, February.
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    7. Landes, Maurice R. & Jha, Shikha & Srinivasan, P.V., 2007. "Indian Wheat and Rice Sector Policies and the Implications of Reform," Economic Research Report 6386, United States Department of Agriculture, Economic Research Service.
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    9. Sharma, Vijay Paul & Alagh, Munish, 2013. "Food Subsidy in India: Its Components, Trends, Causes and Reforms for Public Policy," Indian Journal of Agricultural Economics, Indian Society of Agricultural Economics, vol. 68(2), pages 1-27.
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    More about this item

    Keywords

    models; food security; income; rice; forecasting; prices; markets; agricultural policies; food policies; subsidies; India rice model; national food security act; price effect; inelastic and elastic income effect; C15 Statistical Simulation Methods: General; C53 Forecasting Models; Simulation Methods; Q11 Agriculture: Aggregate Supply and Demand Analysis; Prices; Q17 Agriculture in International Trade; Q18 Agricultural Policy; Food Policy; Q31 Nonrenewable Resources and Conservation: Demand and Supply; Prices;

    JEL classification:

    • C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • Q11 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Aggregate Supply and Demand Analysis; Prices
    • Q17 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agriculture in International Trade
    • Q18 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Policy; Food Policy
    • Q31 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Demand and Supply; Prices

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