Shortage of pulses in India: understanding how markets incentivize supply response

Purpose - This paper aims to understand the significant farm and market-level factors that incentivize the adoption and marketing of pulses influencing its supply response to changing demand. Design/methodology/approach - The authors first use a modified Nerlovian supply response model using secondary data to identify the major price and non-price factors influencing the supply of pigeon pea, black and green gram in the major pulses growing states in India. Second, using primary qualitative data the authors map the pulses value chain from farm to retail to identify the how proportional and fixed transaction costs (FCTs) influence market participation of pulses growers and limit the transmission of price and quality information. Findings - The supply response model shows some positive influence of price on area allocation for pigeon pea and black gram and some negative effects of yield and price increase of competing crops on pigeon pea acreage. However, for the most part, the area of Kharif pulses is inelastic to prices in the long run. Irrigation, rainfall and yields in the lag year are shown to have a significant influence on area allocation for pulses. The market study reveals that low yields, low landholding size and geographical disadvantages of high agro-climatic risk and poor connectivity hinder market access of pulses farmers relative to other crops. Market power in favor of buyers and poor price and quality information is a disadvantage to sellers, influencing their ability to participate in markets. Research limitations/implications - A quantitative study would be required to identify the magnitude of farm and market-level transaction costs. Originality/value - This study helps to understand the supply response of pulses and gives suggestions to direct policy to rectify this.