An econometric analysis of pulse prices in India
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Date
2018-09
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G.B. Pant University of Agriculture and Technology, Pantnagar - 263145 (Uttarakhand)
Abstract
Pulses form an important constituent of the food basket, serving as a cost-effective and nutritionally balanced rich source of protein for people, particularly in India. Although, India is the largest pulse producing country in the world, the production of these crops has shown sluggish growth over the years leading to low per capita availability and spiral in prices. Assurance of a remunerative and stable price environment for growers is one of the important aspects for increasing agricultural production and productivity. The present study was undertaken to analyse the aspects of growth, price volatility and price transmission for five major pulses in India. The study was based on secondary data for the period 1996-97 to 2016-17, further, divided into two sub periods: before NFSM (1996-97 to 2006-07) and after NFSM (2007-08 to 2016-17). The compound annual growth rate and instability in production of pulses were estimated using exponential growth function and Cuddy Della Vale Index (CDVI), respectively. The variability in prices of pulses was analysed using ratio method for inter and intra-year variability and GARCH (1, 1) model for extent of volatility. Descriptive analysis was done to examine the behaviour of MSP, FHP, cost of production and wholesale prices of pulses. Johansen co-integration test and Vector Error Correction Model (VECM) was used to study the vertical integration between wholesale and retail prices of pulses in major markets. The presence of asymmetry in vertically integrated markets of pulses was examined using Von Cramon-Taubadel model. The results revealed the low growth rate of about 1-2 per cent per annum in production of major pulses during the study period. Generally, the area has recorded lower growth than the yield for major pulses. The variability in area, production and yield of pulses were observed in the range of low to medium (<30 per cent). Production of pulses was found most fluctuating while area under pulses was least fluctuated during the period. The high fluctuations in production of pulses result in high variability in prices of pulses. The prices of pulses were observed highly volatile with no tendency to reverse to the mean. Further, the inter-year variability in prices of pulses was observed higher than the intra-year variability. The wholesale prices of pulses recorded least growth and highest variability as compared to MSP, FHP and cost of production implying that the fluctuations in pulse prices is a major concern rather than the level of prices in the economy. The study also reveals high growth rates in MSP of pulses in recent period. It shows the efforts of government to boost pulse production in the country. But MSP for pulses have been only notional and ineffective as the FHP was observed more than the MSP and farmers prefer to sell their produce in the market. Inefficiency was observed in pulse markets as wholesale and retail prices were co-integrated only in few markets in the long run while they behave independently in the short run. The presence of asymmetry in wholesale-retail price transmission in almost all the selected markets of pulses further strengthens the evidence of inefficient pulse markets. So, there is a need for regular monitoring of pulse prices, filling the information gap on prices and government intervention, when necessary, to stabilize the prices of pulses. Efforts should also be made to ensure greater market efficiency through improved physical and institutional market infrastructure. It will lead to net welfare encouraging farmer to grow more pulses.
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