Price Fluctuation
“The upward and downward movement in price of a
commodity or group of commodities is termed as price fluctuation”. The dynamic
factor here is time.
The reasons behind the price fluctuations may be
summarized as
Short time fluctuations
- Arrival and offtake
of commodities in the market
- Strike or law and
order problem
- Rumours in the market
- Announcement of
government policy
Intra year fluctuations
- Seasonal nature of
production and demand
- Perishable nature of
product
- Hoarding and
speculations
- Government policy on
procurement
- Input supplies and
its prices
Inter year fluctuations
- Natural calamity
- Change in export and
import policy
- Change in weather
conditions remarkably
Long term fluctuations
- Change in technology
- Money supply
- Change in export and
import, credit, infrastructure and tax structure
Effect
of Price fluctuations
General problems
- Imbalance in demand
and supply of commodities
- Poor allocation of
productive resources
- Poor consumer
satisfaction
- Difficulty in
economic planning and policy
- Less incentives to
the farmers
Specific problems
- Reduction in the
farmers income
- Reduction of farm
production
- Agricultural allied
sectors affected due to irregular supply of products
- Lending institutions
troubled due to improper return of the loans
- Reduction in the
employment opportunities
Price control measures
Non-Price measures
- Building sufficient
buffer stock
- Procurement and public
distribution when there is imbalance in the demand and supply in the
market
- Increase in the
agricultural production and stabilization to maintain constant supply
- Regulation of imports
and exports
- Provision of better
infrastructure and improvement in the efficiency of marketing
Price
control measures
- Fixing up of
maximum/ceiling price for each agricultural commodities
- Fixing up of minimum
price
- Fixation of
administered price
It has to be noted that selective application of
these measures at the appropriate time based on demand and supply in the market
is essential for a better regulation of the price.
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