Augmenting farmers’ income through market integration: a study on onion markets in India

The study investigates market integration across five major wholesale onion markets of Maharashtra and West Bengal-Lasalgaon, Pune, Nagpur and Ahmednagar from Maharashtra and Kolkata (Barabazar) market from West Bengal-by adopting Johansen's multivariate cointegration approach. The study confirms the presence of cointegration, implying the long-run price association among the markets. The Granger causality test has been used for additional evidence whether and in which direction price transmission is occurring between the markets pairs. Out of eight possible market pairs, considering Kolkata to be a consuming market, Pune and Nagpur found to have bidirectional causality with Kolkata, while Lasalgaon and Ahmednagar have unidirectional causality. A vector error correction model (VECM) was also applied to know the extent price adjustments in the short term. It was found that the price can be adjusted in the short term only in Lasalgaon and Pune but not in Nagpur and Ahmednagar. One-third of the farmers’ income can easily be enhanced through better price realization and smooth price transmission can augment the process greatly. The major implication of the study is that excessive volatility in prices can be addressed by a multi-pronged strategy involving production technology, extension, public stocks and market intelligence.