[Mission 2024] STATIC QUIZ, 20 October 2023 – Economy

Solution: a)

Only statement 1 is correct.

Buffer stock refers to a reserve of a commodity that is used to offset price fluctuations and unforeseen emergencies. It is generally maintained for essential commodities and necessities like food grains.

The concept of buffer stock was first introduced during the 4th Five Year Plan (1969-74)

Buffer stock is maintained for pulses also. Cabinet committee on economic affairs fixes buffer norms every year.

Solution: b)

MSP can be anything that the government considers that the farmers should fairly get. This is to help them get fair remuneration for their produce and to motivate or demotivate them to produce a particular crop. Hence it can be either lower or higher than the market price. For e.g. if the government wishes to discourage rice farming, it would lower the MSP of rice.

The procurement system decentralization was started in 1997 where states play a very important role in the supply chain. Not all procurements are done by FCI. State cooperative agencies and other state-level distribution agencies also play a crucial role.

Solution: c)

The Agricultural Market Information System (AMIS) is an inter-agency platform to enhance food market transparency and policy response for food security. It was launched in 2011 by the G20 Ministers of Agriculture following the global food price hikes in 2007/08 and 2010. Bringing together the principal trading countries of agricultural commodities, AMIS assesses global food supplies (focusing on wheat, maize, rice and soybeans) and provides a platform to coordinate policy action in times of market uncertainty.

Solution: d)

• The economic cost of food grains procured by the Food Corporation of India (FCI) is a total of Minimum Support Price and bonus (if any) paid to the farmers plus the procurement incidentals and distribution cost.
• FCI’s economic cost has three main components – procurement cost, procurement price, and distribution cost.
• The procurement incidentals are the initial costs incurred during the procurement of foodgrains.

The distribution costs include freight, handling charges, storage charges, losses during transit and establishment cost.

Solution: b)

Option 1 is incorrect.

Agriculture subsidies can be direct or indirect farm subsidies taking account the instruments used in providing them.

Direct Farm subsidies involve giving cash to the farmers. India provides direct subsidies in a limited form which include giving food subsidy or MSP-based procurement, etc. These are the kinds of subsidies in which direct cash incentives are paid to the farmers in order to make their products more competitive in the global markets.

Indirect farm subsidies: These are the farm subsidies which are provided in the form of cheaper credit facilities, farm loan waivers, reduction in irrigation and electricity bills, fertilizers, seeds and pesticides subsidy as well as the investments in agricultural research, environmental assistance, farmer training, etc.