Determinants of Price in World Wheat Markets-Hidden Lessons for Indian Policy Makers?
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.
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Volume (Year): 38 (2003)
Issue (Month): 2 (July)
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