Market Integration and Price Transmission Analysis of Onion in Wholesale Markets of India

Abstract

The present study was done in seven major onion wholesale markets in India, namely Pimpalgaon, Lasalgaon, Solapur, Pune, Bangalore, Hyderabad and Indore to explore the interdependence of wholesale prices amongst Indian onion markets. The study was conducted in all India perspective and the study period involves the seventeen years data of onion wholesale prices (January 2004 to December 2020). The study was majorly based on the prices of onion obtained through secondary source. These data were collected from various portals such as FAO, NHRDF, Agmarknet and NHB. The current study employs co-integration analysis of wholesale monthly onion prices in selected marketplaces to determine the degree of market integration. The Trace and Maximum Eigen-value tests results showed that the onion prices in India moves together in the long run equilibrium. As a result, it may be stated that India's onion markets are well-functioning. The direction of information flow was determined by using Granger Causality test. It was found that in few markets pairs, price transmissions were bi-directional whereas between Bangalore and Pune market, no transmission was found. The study reveals that Lasalgaon market is dominating in terms of price determination. The empirical study also recommends keeping a careful eye on diverse market behavioural patterns, since "news" in one market might have an influence on other markets due to the numerous interdependencies.