PRICE MOVEMENTS FOR RICE AND WHEAT - A STRUCTURALIST POLICY PERSPECTIVE

Persistent increase in food prices and its impact on society and economy have been of prime concern for the government and its policy makers in India since 2005-06. Though these rates have eased to some extent in the recent months; with expected recovery of the economy and inherent supply bottle necks, the problem of inflation remains serious. This paper examines the price movements in rice and wheat, following structuralist principles emphasizing the necessity of long term solutions in combination with short and medium term management. However, unlike completely free systems, markets for these products are characterized by government interventions, calling for a slightly different approach under which interactions of demand and supply need to incorporate government interventions by way of minimum support price and procurement. The sample for this study consists of the period, 1980-81 through 2011-12 on an annual basis. Our results confirm strong impact of demand and supply factors in determining inflation for both the products. These include the role of government interventions as well as public investment in agriculture in ensuring price stability.