India's Political Economy Responses to Global Food Price Shock of 2007-08: Learning Some Lesson

India's policy responses were strong to the food price crisis. Exports of basic staples were banned, domestic support prices of wheat and rice were raised substantially, urea price increases in global markets were absorbed through enhanced fertilizer subsidy, and a National Food Security Mission was launched to raise grain production by 20 MMT over the next five years. The results: India contained food inflation below 7 percent in 2007-08; grain production increased by 42 MMT; and grains stocks touched 82 MMT. With freeing of exports in September 2011, India became a world leader in rice exports. The cost of this policy was rising subsidies on food and fertilizers, rising fiscal deficit, leading to double digit food inflation after 2009-10. Had India quickly reviewed its export ban policy, and opened exports earlier, it could avoid excessive grain stocks, reduced fiscal deficit, and benefited global markets, leading to a win-win situation.

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 Record created 2017-04-01, last modified 2019-08-30

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