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Additional resources for Developing Agricultural Trade: New Roles for Government in Poor Countries
Rather, the decision to authorise open market operations was prompted by operational and financial considerations. On the operational side, it was hoped that sales could be used to stabilise open market prices in the lean season. Financial imperatives arose because of the excessive carrying costs being incurred on large stocks. In 1993, when FCI was first permitted to sell wheat, existing stocks in FCI and hired facilities were at very high levels leaving insufficient storage capacity for the next season’s procurement.
The basic rationale behind food policy in India was the need to stimulate domestic production and to ensure prices for basic commodities particularly grains did not rise. The trade policy for agriculture was highly restrictive and the domestic agricultural sector was insulated from world markets via central control over imports and exports. Although not formally part of the planning system, the food management system which emerged to govern the functioning of the domestic market was moulded by the same concerns.
As with other adjusting countries, India shares the task of reorienting government from its historic function of direct provider of goods and services to manager of the economy, and the tasks of enabling, regulating and contracting that this entails. This chapter explores the capacity of the Indian government to reform its role in agricultural trade. It overviews the organisational arrangements of government’s interventions in agricultural trade, current reforms, performance of the arrangements and the forces for and against change.