An econometric investigation on paddy market integration in India

The present study examined the seasonality and price integration in five major states/markets of paddy in India. The data showed an increasing trend for arrival and prices in different markets. The prices of rice were higher in the months from July (lean period) and lowest in month of November and December (peak period) in all selected markets. Inverse relationship between arrival and prices was observed in the selected markets. The degree of integration assessed using the Johansen's cointegration test indicated a strong spatial integration and price transmission in the long-run. Price transmission between markets is a consequence of information flow owing to the development in market system. However, the speed of flow is highly influenced by the government policies, intervention and investment on resources. The present study enlightened the significance of commodity based research since it guides the policy makers on scarce resources like- poor market intelligence and poor physical infrastructure. For better and sustainable performance of highly integrated markets, there should be allocation of more resources and for the less integrated markets, the policy intervention calls for strengthening market intelligence wing in all markets along with the establishment of online marketing system, additional investment and awareness creation is also needed to bring down the distortions.