Impact of Market Reforms on Price Integration: A Study of Wholesale Spice Markets in India

Integration of market prices of commodities across various markets is one of the stated objectives of many agricultural marketing reforms undertaken in the country. Well integrated and efficient agricultural markets can allocate resources optimally and remove inefficiencies along the product value chain, thereby directly affect farmer producer welfare. This study takes an analytical look at the impact of a slew of agricultural market reforms policies focusing on Agricultural Produce Market Committee acts starting from 2002–03. The study analyses the marketing of spices, one of the most tradable commodities with a market oriented production system. The effect of major market reforms in improving the efficiency of wholesale spice markets through reduction in market segmentation is examined using data on monthly price dispersion of major spices across wholesale markets in the country. The study finds that the magnitude of reduction in market segmentation in response to the market reforms is low and varies across domestically traded spice commodities. The persistence of high degree of price dispersion in spice markets creates a significant price wedge between producer prices and consumer prices resulting in higher cost for both farmers and consumers alike. The study highlights the need for strengthening and pursuing the reform agenda for agricultural markets to create a unified market for agricultural commodities in the country.