In the recent past, rice price was experiencing an upward trend at home and abroad. Existing
high import parity price (during this period of time) diminished the scope for the private
sector to play the same stabilizing role, as was the case about a decade ago. In view of these
changed circumstances, the major objective of this study is to compare the impact of several
government policy options on the food security of different income groups.
 Two interconnected models (namely the “market model” and the “household food security
model”) have been developed where government policy instruments are present as the
exogenous variables in the system. The idea is that a “market model” will solve for the
equilibrium price in the food grain market (as this equilibrium price is determined, among a
number of other factors, government interferences in this food grain market). The next point
is that the equilibrium price in the food grain market will enter a “household food security
model” where the determinants of household food security will be estimated, along with the
equilibrium prices in the food grain market, given that the government intervenes directly
through transfers and indirectly through the food grain market as well as the agricultural
input market.
 Rice prices are determined in the market through the interactions of three segments of the
market-- the demand for rice, the supply of rice and the rice import. The key variables that
influence rice price in the market are mostly those of supply side, such as area of rice
production, and the amount of rice production itself. One more variable that is found to be
quite significant in its contribution to determination of rice prices is the agents’ expectations
of future prices of rice (taking an one-month lagged price of rice as proxy for this variable).