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Determinants of Price in World Wheat Markets-Hidden Lessons for Indian Policy Makers?

Author

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  • C. S. C. Sekhar

    (Agricultural Economics Research Centre, Delhi School of Economics Campus, University of Delhi, Delhi-110007)

Abstract

This paper is an attempt to trace the likely implications of agricultural trade liberalization for India through the linkage between domestic and international markets, in the backdrop of price formation mechanism in world wheat markets. The analysis is carried out in a structural modeling framework using a two-sector simultaneous equations model. The simulation results highlight the rigidity in supply-response of Indian farmers to higher world prices, possibly due to supply constraints imposed by non-price factors. The exports are likely to increase and imports show a likely decline. The stagnant domestic production combined with increased exports, decreased imports and rising population is likely to result in a decline in percapita net availability of wheat in domestic market leading to an increase in domestic prices about 8.5% per annum in nominal terms- after liberalization. The policy implications of the study include gradual liberalization of trade in case of important commodities like wheat while maintaining the current buffer stock policy for some time, investment in capital formation and reforms in price policy.

Suggested Citation

  • C. S. C. Sekhar, 2003. "Determinants of Price in World Wheat Markets-Hidden Lessons for Indian Policy Makers?," Indian Economic Review, Department of Economics, Delhi School of Economics, vol. 38(2), pages 167-187, July.
  • Handle: RePEc:dse:indecr:v:38:y:2003:i:2:p:167-187
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    Cited by:

    1. Gopakumar K.U. & V. Pandit, 2014. "Production, Procurement And Inflation-A Market Model For Food Grains," Working papers 238, Centre for Development Economics, Delhi School of Economics.

    More about this item

    Keywords

    Agricultural Trade; Indian Wheat Markets;

    JEL classification:

    • C30 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - General
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • Q11 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Aggregate Supply and Demand Analysis; Prices

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