Market Integration and Price Transmission in Major Onion Markets of India

Abstract

Market integration and prices in horticultural crops such as onion play an important role in determining the production decisions of the farmers and diversification to high value crops. In this context, the study explores market integration and price transmission in selected onion markets using Johansen cointegration, Granger causality and impulse response function. The outcomes of the study strongly buttressed to the co-integration and interdependence of onion markets in India. The impulse response function supported that except Mumbai and Kozhikode, all other selected markets are responded well to standard deviation shock given to any of the markets. One of the possible reasons might be that Mumbai is the largest supplier of onion and Kozhikode is geographically dispersed and is a sea port, where foreign produce may be arriving in a larger quantity. The overall regional markets of onion are strongly cointegrated that allows the private traders and restricts the role of government intervention.