Agricultural market integration in India: An analysis of select commodities

One of the main arguments against agricultural trade liberalization in India is that the markets are not sufficiently integrated. The present study makes a systematic attempt to assess the extent and degree of integration among select agricultural markets in India. We have used the common factor representation of the cointegrated series, called Gonzalo–Granger (G–G) model, to assess the extent of market integration. Degree of market integration has been assessed using the persistence profile approach. Our results indicate that the commodity markets that do not face inter-state or inter-regional movement restrictions, like gram and edible oils, appear well-integrated. On the contrary, rice market, subject to the maximum inter-state movement restrictions, does not show integration at the national level. The broad implication of the study is that the markets can play a more effective role if supplemented with more open policy initiatives.