Welfare effects of selected food-grain policies in India

Government's policy interventions in the market for food-grains affect supply as well as demand. In this paper, the welfare effects of certain food-grain policies are analysed while taking into account the interdependence of the various sectors in the economy. Adequate structure is built into the model in order to study the effects of a dual price structure on farmers' supply response, and also the effects of public distribution schemes on the aggregate demand for food-grains. Policy implications are derived by computing the market clearing prices and their movement under alternative assumptions regarding the nature of the market.