Standing between producers and consumers - the two classes with conflicting interests, - the Government has been compelled into populist political operations, and had been forced to purchase vast amounts of foodgrain, in order to maintain the level of the farmgate crop prices, despite the record - high level of the buffer inventory and growing concerns over the excess stocks. The Government's buffer stocks levels from 1980 to 1997 (records as of January 1st each year) averaged 17.21 million tons (SD 6.26 million ton), and the peak was as high as 36.54 million tons (June 1995). The scale of the buffer stocks should be evident in view of the fact that the foodgrain output for the period was 153.1 million tons (SD 17.38 million tons) and the rate of marketable crops was about 40%.
This cannot be explained by any economic logic, but is probably the result of pressure from the new farmers' movements and their lobbying activities. The foodgrains bought by the Government have been sold to the poverty class at prices lower than the Government's buying prices at more than 400,000 "fair-price" shops under the Public Distribution System (PDS), and the negative spread is subsidized by increasing the budget deficit. Although the buffer stocks are above the appropriate level, the rationing prices are still kept low even in the 1990s while the government buying prices continue to rise. India started to import foodgrains in the latter half 1980s, but in view of the vast population below the poverty line, this could be called "hunger export". Nonetheless, reduction in the foodgrain price by releasing the excess stocks to the market, which would please the poor, would provoke the anger of farmers with marketable surpluses, widen the negative spread, and increase the budget deficit. India is in a dilemma such that it has to maintain economically inappropriate agricultural policies while the inventory tends inevitably to accumulate further. Moreover, the considerable amount of expenditure on agricultural subsidiaries, generated for political reasons, has brought about budget deficit as well as a distortion of the markets related to agricultural production, and may hamper establishment of the country's competitiveness in the international agricultural market. In addition, it has created a new problem in as much as public capital formation on the agricultural sector is decreasing.
