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Managing food price volatility in a large open country : the case of wheat in India

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  • Gouel,Christophe
  • Gautam,Madhur
  • Martin,William J.

Abstract

India has pursued an active food security policy for many years, using a combination of trade policy interventions, public distribution of food staples, and assistance to farmers through minimum support prices defended by public stocks. This policy has been quite successful in stabilizing staple food prices, but at a high cost, and with potential risks of unmanageable stock accumulation. Based on a rational expectations storage model representing the Indian wheat market and its relation to the rest of the world, this paper analyzes the cost and welfare implications of this policy and unpacks the contribution of its different elements. To analyze alternative policies, social welfare is assumed to include an objective of price stabilization and optimal policies corresponding to this objective are assessed. Considering fully optimal policies under commitment as well as optimal simple rules, it is shown that adopting simple rules can achieve most of the gains from fully optimal policies, with both potentially allowing for lower stockholding levels and costs.

Suggested Citation

  • Gouel,Christophe & Gautam,Madhur & Martin,William J., 2016. "Managing food price volatility in a large open country : the case of wheat in India," Policy Research Working Paper Series 7551, The World Bank.
    • Handle: RePEc:wbk:wbrwps:7551
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    References listed on IDEAS

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    Cited by:

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    2. Taraz, Vis, 2018. "Can farmers adapt to higher temperatures? Evidence from India," World Development, Elsevier, vol. 112(C), pages 205-219.
    3. 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.
    4. Martin, Will, 2021. "Tools for measuring the full impacts of agricultural interventions," IFPRI-MCC technical papers 2, International Food Policy Research Institute (IFPRI).
    5. Ginn, William & Pourroy, Marc, 2022. "The contribution of food subsidy policy to monetary policy in India," Economic Modelling, Elsevier, vol. 113(C).
    6. Will Martin & Nicholas Minot, 2022. "The impacts of price insulation on world wheat markets during the 2022 food price crisis," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 66(4), pages 753-774, October.
    7. 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.
    8. Durevall, Dick & van der Weide, Roy, 2014. "Importing High Food Prices by Exporting: Rice Prices in Lao PDR," Working Papers in Economics 607, University of Gothenburg, Department of Economics.
    9. Xiangjun Wu & Juan Xu, 2021. "Drivers of food price in China: A heterogeneous panel SVAR approach," Agricultural Economics, International Association of Agricultural Economists, vol. 52(1), pages 67-79, January.
    10. Dick Durevall & Roy Weide, 2017. "Importing High Food Prices by Exporting: Rice Prices in Lao PDR," Journal of Agricultural Economics, Wiley Blackwell, vol. 68(1), pages 164-181, February.
    11. Jan Brockhaus & Jan Brockhaus & Matthias Kalkuhl, 2015. "Drivers of private grain storage. A computational-economics and empirical approach," EcoMod2015 8430, EcoMod.
    12. Kym Anderson, 2016. "Agricultural Trade, Policy Reforms, and Global Food Security," Palgrave Studies in Agricultural Economics and Food Policy, Palgrave Macmillan, number 978-1-137-46925-0, December.
    13. McCorriston, Steve & MacLaren, Donald, 2016. "Parastatals as instruments of government policy: The Food Corporation of India," Food Policy, Elsevier, vol. 65(C), pages 53-62.
    14. 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.

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