Question

Briefly explain the role of buffer stocks in the context of agricultural marketing.

Answer 1

The Government of India has adopted the policy of buffer stocks to minimise the fluctuations in the food prices. Buffer stocks serve as shock absorbers in the economy and provide a defence mechanism against the widely fluctuating price levels. Under the buffer stock policy, the government builds up stocks of food through direct purchases from the farmers and releases these stocks for sale in the domestic market where prices are increasing. Also, buffer stock operations aim at eliminating unduly low prices consequent to bumper crops.