Indian Express Editorial Summary

Editorial Topic : Food for a Rainy Day: Buffer Stocks to Tame Food Price Volatility

 GS-3 Mains Exam : Economy

Problem: High volatility in food prices hurts both consumers and producers.

Solution: Create buffer stocks of essential food items, similar to RBI’s forex reserves.

How RBI Manages Currency Volatility:

  • Maintains foreign exchange reserves (over $650 billion) to ensure orderly exchange rates.
  • Doesn’t interfere with the normal functioning of the currency market.

Replicating RBI’s Model for Food Prices:

  • Build buffer stocks of rice, wheat, pulses, oilseeds, sugar, skimmed milk powder (SMP), and staple vegetables.
  • Don’t set prices or supplant the market, but curb excessive volatility.
  • This volatility makes it difficult for RBI to manage inflation:
    • Core inflation (excluding food and fuel) is low (3.1%).
    • Retail food inflation is high (8.7%).

Causes of Food Price Volatility:

  • Primarily due to climate change:
    • Fewer rainy days, dry spells, and intense precipitation.
    • Shorter winters and heat waves.
  • Recent example: Poor crops of pulses, tomato, potato, and wheat in central India.
  • Supply shocks (climate, war, pandemic) cause price spikes.
  • Farmers increase production, leading to price declines.

Example: Milk Price Volatility:

  • Feb-March 2023: Dairies paid Rs 37-38 per litre for cow milk.
  • July 2024: Procurement price dropped to Rs 26-27 per litre due to falling SMP prices.
  • Low prices discourage milk production, potentially leading to shortages and inflation next year.

Benefits of Buffer Stocks:

  • Procure from farmers during surpluses and sell during shortages.
  • Moderate extreme price fluctuations.
  • Low fiscal cost: stocked items can be sold at near-market rates during scarcity.
  • Example: Open market sales of wheat and chana helped control cereal and pulses inflation.
  • Avoids regressive measures like export bans or stock limits on traders.


Buffer stocks of essential food items can help manage food price volatility caused by unpredictable supply shocks.

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