Agriculture Reforms and Market Integration: A Spatial Analysis of Food and Non-Food Commodities

Against the background of a series of macroeconomic, agriculture marketing and price policy reforms initiated from the early nineties, this paper seeks to empirically measure the extent to which reforms have led to a higher and quicker integration of agriculture markets across the states. It then explores the policy options that would improve the commodity price transmission and build a market-oriented agri-marketing system in view of APMC Draft Model Rules, being proposed for revamping regulated markets, and enable the emergence of new platforms for agri-marketing. Results based on multivariate co-integration and vector error correction model from 1980-81 to 2002-03 confirm greater spatial market integration in the post-liberalisation period for rice, wheat, sugar and groundnut though only in the selected states. For cotton and soya bean seed, long-run equilibrium relationship among the state-level wholesale markets is found to be weak. Further, in all commodity cases, short-run dynamics based on vector error correction model reveal a slow speed of adjustment of prices towards equilibrium, which calls for accelerating the pace of agri-marketing reforms.