India to offer price forecasting mechanism to neighbouring countries

News Excerpt:

India is willing to offer its South Asian neighbours an artificial intelligence (AI)-based mechanism to predict prices of essential food commodities, a technology that has helped India tame food inflation.

Price forecasting mechanism:

  • The government has developed an AI-based real-time supply and demand prediction model for agricultural commodities, which takes into account external factors such as weather and trade-related measures.
    • This initiative was taken in response to a patchy monsoon that disrupted kharif crops, affecting the sowing and vegetative seasons.
  • The model uses historical data to provide accurate predictions of price patterns for specific commodities in different regions.
    • It can predict the prices of essential commodities for 30, 45, and 60 days in advance with much accuracy.
    • However, for the model to work effectively, the country needs to have its own data.
  • The government's price monitoring cell which runs this technology, collects price data for 22 commodities from 550 places and three data sources daily, is being merged with the price stabilisation fund (PSF).
    • The PSF aims to build buffer stocks of key food commodities, which are selectively released into the open market to control prices.
    • This is in line with the PM’s ‘whole-of-government’ approach that merges small things to have logical verticals.

Significance:

  • This helps the government make informed decisions at the right time.
    • Last year the government imposed a ban on rice exports, raised duties on onions and sold tomatoes to consumers at a subsidised rate.
    • As a result, food inflation cooled to 6.56% in September against 9.94% in August, and vegetable inflation in September eased to 3.39% from 26.14% a month earlier.
  • The mechanism will help countries better plan for demand of essential commodities and plan how much needs to be imported.
    • If one wants to see the price pattern of a commodity in a particular region, let’s say mustard oil in Hooghly for the last 10 years, it can be done instantly.
    • India has recently exported onions and rice to strategic partners such as Bangladesh, the UAE, Mauritius, Bhutan and Bahrain.
  • The government is also using the model to reduce errors and improve decision-making.
    • In January, the government used the technology to predict onion prices for a particular date in March. Once the actual prices came that day, it was able to make a comparison and note the error, reducing it over time.
  • Overall, the predictive pricing mechanism is a significant step towards stabilising agricultural commodity prices and ensuring food security in the country.
    • The first country to receive the technology may be Sri Lanka – a timely help for a country that is emerging from the throes of an economic crisis.