A Study on Integration of Domestic and International Markets for Chilli

India is the world leader in chilli production, contributing to 68% of the total world production, consumes 90% of the country's production. Domestic marketing takes place through a network of regulated markets through open auction and even exported to Srilanka, Bangladesh, Malaysia, USA, Nepal, Indonesia, UAE, and Italy. Knowledge of market integration is most relevant for the policy of price stabilization or market liberalization. The performance of major domestic regulated markets in the country for chilli Viz. Guntur (AP), Virudunagar (TN) and Nagpur (Maharashtra) has been studied through Johansen's co-integration test for the period from Feb. 2003 to Nov. 2014. The relationship between domestic and International market prices for chilli has been examined for the period from April 2009 to Nov. 2014. The results showed that long run market integration does exist among domestic markets. The country's major chilli markets are also integrated with the world market. The prices are determined in the above three domestic markets due to the market intelligence functions performed by the AGMARKNET and Spices Board through electronic and print media on daily basis to benefit the gross root level producers and consumers to enhance transparency in the marketing system. The Government should closely observe the leader market (Virudunagar) for policy decisions and price stabilization.