Analysis of Co-Integration among Major Potato Markets in India

Potato, one of the most important food crops after wheat, maize and rice, contributing to food and nutritional security of the world has emerged as an integral part in the food system of the people. This study has examined cointegration and price transmission and thereby the efficiency of major potato markets in India i.e. Agra, Patna, Burdwan, Indore, Jalandhar and Ahmadabad. The cointegration between the future market (MCX) and spot market (Agra) was also analysed using cointegration and error correction model. The results of overall cointegration test have indicated that different wholesale potato markets in the country are wellintegrated and have long-run price association across them suggesting that these markets are competitive and efficient at the wholesale level. However, in short run, market prices do deviate from their equilibrium but converge in few weeks. The market pairwise cointegration test has confirmed that all the different market pairs considered had price association between them and Agra market was realized as the price leader as it influenced the prices of all other markets. Long run price association between the Agra market and national future market was also established and a unidirectional price flow from future market to Agra spot market was found which further transmit to all other potato markets in the country thereby stabilizing the prices over space. The knowledge on market integration will be a guiding principle for understanding the efficiency of the marketing system and policy makers, producers and traders can use the results to their benefits.