Chand Ramesh (2000).

Equity Driven Trade and Marketing Policy Strategies for Improved

Performance of Indian Agriculture, Sub Project: Trade Liberalisation, ACIAR-ICAR
Collaborative Study, National Centre for Agricultural Economics and Policy Research, New
Delhi.
Government Intervention in Agriculture Market Pricing Policy in India
(A curious case of cottons MSP)

Primary source: 1
1. Chand Ramesh (March, 2003) Government Intervention in Food grain Markets
in the New Context, Policy Paper 19, The Indian Council of Agricultural
Research (NIAP) Publications, NATIONAL CENTRE FOR AGRICULTURAL
ECONOMICS AND POLICY RESEARCH, New Delhi.
a. To ensure competitiveness of market
i. if market is not competitive or is unfavourable for private trade then
there could be need for government to ensure minimum support
through purchases from the market
ii. **
b. In case the market price determined by supply and demand does not leave
adequate margin over support price, private trade would not buy the produce
at support price howsoever competitive the market may be. This can happen
when growth in demand does not keep pace with the supply and, when
support price is fixed based on supply side factors only. This is exactly
what is being experienced in the case of rice and wheat in the country.
i. **
c. Table 5.2: Annual rate of growth in prices of rice and wheat and all
commodities during 1980-81 to 1999-00
d. Beside prices there are indications of cereal demand getting reduced to some
extent due to changes in consumption pattern. This is evident from the fact
that despite the lower growth in retail prices of cereals compared to prices of
other food, implying decline in real terms, per capita cereal demand has
followed declining trend. This way, both price factor as well as change in
consumers preference to shift from cereals to non cereal products are
responsible for decline in per capita cereal demand in the recent years

i. Excess supply can also change tastes + preferences and thusprice

factors can not control them here this event of change in preference is
both Cause and Effect of the same
e. The solution lies in adjusting supply to demand. One way to do this is to bring
some reduction in area under cereals in inefficient producing regions.
i. **
ii. Same as the case with sugar cane, Maharashtra cane arrears and
irrigation catastroph due to dryinh under ground water levels
f. Price based solution to restore balance between cereal supply and demand in
the present situation requires market prices to come down to raise the level of
demand and reduce the level of supply till they are in equilibrium.
i. Equilibrium
g. decline in crop income and would cause adverse impact on agriculture sector
which is already under threat due to trade liberalisation and, is not able to cope
up with low level of international prices.
i. How ???
h.