GS PrelimsAgricultureMinimum Support Price (MSP)2020

Which of the following factors/policies were affecting the price of rice in India in the recent past? 1. Minimum Support Price 2. Government's trading 3. Government's stockpiling 4. Consumer subsidies Select the correct answer using the code given below:

A

1, 2 and 4 only

B

1, 3 and 4 only

C

2 and 3 only

D

1, 2, 3 and 4

Correct Answer: Option D

Explanation

1. Statement 1 (Minimum Support Price - MSP): The government sets MSP for rice, acting as a floor price. Government procurement at MSP influences market supply and provides a benchmark, thus directly affecting the price of rice. 2. Statement 2 (Government's trading): The government procures large quantities of rice and also sells it through the Public Distribution System (PDS) and Open Market Sale Scheme (OMSS). This buying and selling activity (trading) significantly impacts market supply and price. 3. Statement 3 (Government's stockpiling): The government maintains buffer stocks of food grains, including rice. Decisions related to the level of stockpiling (building up or releasing stocks) affect the available supply in the market and influence price stability. 4. Statement 4 (Consumer subsidies): Providing rice at subsidized rates to eligible consumers through the PDS lowers the effective price for a large segment of the population. This impacts overall demand patterns and can indirectly influence open market prices. 5. All four factors/policies play a role in affecting the price of rice in India.

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