Market integration and price transmission in India: A case of rice and wheat with special reference to the world food crisis of 2007/08- A paper by Food and Agriculture Organization

This paper by Food and Agriculture Organization sheds light on the significant role played by rice and wheat in the Indian economy, its food security policy and the specific policy measures that were taken during the global economic crisis of 2007/08. It reviews the domestic policies related to marketing of rice and wheat, which also includes holding of public stocks.

Further it assesses the integration of domestic markets with international markets and their congruence of prices. Finally it assesses the impact of high global prices on the farmgate prices. The paper uses both econometric techniques and policy analysis approaches to carry out the study.

The paper is divided into six sections:

Section 1 gives an overview of the issue, with a detailed description of the methodology used to carry out the study.

Section 2 discusses about the basic features and the role of rice and wheat in the Indian economy. It includes the place of rice and wheat in the cropping system, their production performance, changes in consumption levels, state-wise production and market surplus, market related taxes for rice and wheat, programmes of increasing their production and levels of input subsidies.

Section 3 presents India’s food security policy and specific policy measures that were taken during the crisis period. It includes public procurement and distribution of rice and wheat, the extent of food subsidy, trade policy measures, buffer stocking of rice and wheat, and import-export of rice and wheat.

Section 4 spells out the results of econometric analysis of domestic market integration of rice and wheat. Both spatial and vertical integration of domestic markets are brought out in the section.

Section 5 is on the analysis of transmission of international prices to domestic markets. It analyzes the long and medium term movement in international and domestic prices of rice and wheat. Further the behavior of prices at the farmgate (received by the farmers) are highlighted in the section.

Section 6 sheds light on the main conclusion of the study.

Click here to read the full paper.