The present study was formulated to analyze the level of market integration in the major vegetable markets in Punjab. The study was undertaken on a macro framework based on data collected from secondary sources through employing different tests, namely Johansen co-integration test, Grangner causality test. The investigations of integration between sample markets indicated that in case of all of the vegetables the state markets are found to be well integrated among each other and also with the national market (New Delhi) with an exception in case of tomato where it was seen that there was not any integration found between Ludhiana and Jalandhar market which was due to communication problems and lack of market intelligence between those markets. Hence in order to continue the competitive condition of these markets there is need to strengthen the market intelligence and communication within markets so that a better platform could be placed for guiding the farmers in marketing their produce.
The state markets are well integrated among each other and also with the national market (New Delhi) except between Ludhiana and Jalandhar market which was due to communication problems and lack of market intelligence between those markets.
Market integration occurs when prices among different locations or related goods follow similar pattern over a long period of time. Groups of prices often move proportionally to each other and when this relation is very clear among different markets it is said that the markets are integrated. In order to establish the long run equilibrium relation among the price series, it is very necessary to co-integrate them. Advanced econometric techniques like Johansen Co-integration Test, Granger Causality Test and Vector Error Correction Model has been used to study the integration of markets at state and national level. Before starting any statistical test there is a need to check whether the variables are stationary or not as it will help to avoid spurious results. Therefore, it is necessary to examine the time series properties of the variables. Further to establish the long-run equilibrium relation among the price series, it is necessary to co integrate them. The
Market integration is one of the ways to focus on the issues of price fluctuation for the analysis of the market performance (
When there is a change in prices in one market, it will be transmitted to another market on a “one-toone” basis either instantly or over a number of lags (Sanogo and Amadou 2010). The degree, to which consumers and producers would get benefited, is mainly dependent on integration of domestic markets with world markets and that of regional markets with each other (
The integration between the markets can be easily calculated by the accurate estimation of strength and the speed of price transmission in between the markets across several regions of the nation (
Here in this study the major vegetables being produced in Punjab were selected based on their share in total vegetable production of the state i.e. Potato, Tomato, cauliflower and peas accounted for 55.4, 4.5, 5.5, and 5.4 per cent respectively of total vegetable production during TE 2019-20 contributing around 70.8 per cent of total production of vegetables in the state. The selected markets in Punjab for the study were Ludhiana, Amritsar and Jalandhar based on annual market arrivals and data availability. In addition, one national market viz. Delhi was also taken as sample market. Time series data regarding monthly prices and arrivals in the major markets were collected from various secondary sources like agricultural produce market committees of Amritsar, Jalandhar, Ludhiana and New Delhi,
The degree of deviation from the long run equilibrium relationship is explicated by co integration test by the non-stationary series. It is the yoke between integrated processes and steady state equilibrium and hence furnishes the relevant theoretical framework for examining kinetics of instantaneous changes in a pair of series along with their valuable long run information. Once it was confirmed that all of the price-series were stationary at same order of differences, the co-integration of markets were tested by Johansen maximum-likelihood techniques. The
Granger’s causality technique was used to reveal the causal relationship between the prices series in selected vegetable markets. The Granger causality test conducted within the framework of a vector auto regressive (VAR) model was used to test the existence and direction of long-run causal price relationship between the markets. An autoregressive distributed lag (ADL) model for the Granger- causality test was specified as below:
Where,
The results of Johansen multiple co-integration procedure are presented in
Unrestricted Co integration Rank Test (Trace) for selected potato markets
The results of causal relationship between the price series in major potato markets in Punjab and those with the national market (New Delhi) approached through Granger Causality technique are presented in
Results of Granger Causality Test, Sample potato markets
Among the selected potato markets in Punjab, the potato price in Jalandhar market showed bidirectional causality in price transmission with potato price of Amritsar market and Ludhiana market. The potato price in Ludhiana market showed no causality in price transmission with potato price of Amritsar. The New Delhi market showed unidirectional causality in price transmission with potato price of Amritsar, Ludhiana and Jalandhar markets.
The data presented reveals that the Jalandhar market was well integrated with other selected markets of Punjab. However, it was the national market (New Delhi) which influenced the prices of potato in all of the selected markets of the state unidirectionally.
Market integration among selected potato markets
Based on the Johansen multiple co-integration procedure, the integration among the selected tomato markets viz. Amritsar, Jalandhar, Ludhiana and New Delhi was analyzed using the time series data on monthly prices for period 2007 to 2016. Unrestricted co-integration rank tests (Trace and Maximum Eigen value) indicated the presence of at least 3 co-integrating equations at 5 per cent level of significance, thus revealing that most of the selected tomato markets were having long run equilibrium relationship. The results are presented in
Unrestricted Co integration Rank Test (Trace) for selected tomato markets
The results of causal relationship between the price series in major tomato markets in Punjab and those with the national market (New Delhi) approached through Granger Causality technique are presented in
Results of Granger Causality Test, selected tomato markets
Market integration among selected tomato markets
Among the selected Punjab tomato markets, the tomato price in Jalandhar and Ludhiana market showed unidirectional causality in price transmission with tomato price of Amritsar market. The tomato price in Ludhiana market had shown no causality in price transmission with tomato price of Jalandhar. The New Delhi market showed unidirectional causality in price transmission with tomato price of Ludhiana and Jalandhar markets whereas bidirectional causality in price transmission with tomato price of Amritsar market.
Thus, the analysis of prices has revealed that the Amritsar market was well integrated with other selected markets of Punjab. However, it was the national market (New Delhi) which influenced the prices of tomato in all of the selected state markets unidirectionally except Amritsar market where it had a bidirectional relationship.
The results of Johansen multiple co-integration procedure on the integration among the selected cauliflower markets viz. Amritsar, Jalandhar, Ludhiana and New Delhi are presented in the
Unrestricted Co integration Rank Test (Trace) for selected cauliflower markets
Unrestricted co-integration rank tests (Trace and Maximum Eigen value) indicated the presence of at least 4 co-integrating equations at 5 per cent level of significance, thus revealing that all the selected cauliflower markets were having long run equilibrium relationship. Similar study has been recorded by Mohapatra S (2018).
The results of causal relationship between the price series in major cauliflower markets in Punjab and New Delhi market approached through Granger Causality technique are presented in
Results of Granger Causality Test, Sample cauliflower markets
The cauliflower price of Jalandhar and Ludhiana market had shown unidirectional causality in price transmission with cauliflower price of Amritsar market. The cauliflower price in Ludhiana market showed bidirectional causality in price transmission with cauliflower price of Jalandhar. The New Delhi market showed unidirectional causality in price transmission with cauliflower price of Ludhiana and Jalandhar markets whereas it had bidirectional causality in price transmission with cauliflower price of Amritsar market. The direction of price transmission between selected markets is portrayed in
Market integration among selected cauliflower markets
Unrestricted co-integration rank tests (Trace and Maximum Eigen value) indicated the presence of at least 3 co-integrating equations at 5 per cent level of significance, thus revealing that all the selected peas markets were having long run equilibrium relationship (
Unrestricted Co integration Rank Test (Trace) for selected peas markets
The results of causal relationship between the price series in major peas markets in Punjab and those with the national market (New Delhi) approached through Granger Causality technique presented in
Results of Granger Causality Test, Selected pea markets
Market integration among selected peas markets
The above study has concluded that among the selected four vegetables, the co-integration tests indicated that all of the four selected markets were integrated and had long run equilibrium with each other with an exception in tomato where there were found only 3 co integrating vectors. The Granger Causality Test was conducted for all of the four vegetables. In case of potato the Jalandhar market was well integrated with other selected markets of Punjab. However, it was the national market (New Delhi) which influenced the prices of potato in all of the selected markets of the state unidirectionally. In case of tomato, the Amritsar market was well integrated with other selected markets of Punjab and it was the New Delhi market which influenced the prices of tomato in all of the selected state markets unidirectionally except for Amritsar market where it had a two way price relationship. In case of cauliflower, the price in Jalandhar and Ludhiana market showed unidirectional causality in price transmission with price of Amritsar market. The cauliflower price in Ludhiana market showed bidirectional causality in price transmission with cauliflower price of Jalandhar. The New Delhi market showed unidirectional causality in price transmission with cauliflower price of Ludhiana and Jalandhar markets whereas bidirectional causality with cauliflower price of Amritsar market. For peas the national market was well integrated with other selected markets of Punjab. Overall it can be concluded that all of the selected vegetable markets of Punjab were well integrated among each other but most of them were influenced by New Delhi market in unidirectional way i.e. the price change in selected state markets were only being influenced by the price change in New Delhi market but not influencing the price change in New Delhi market.
The efficiency of vegetable marketing has not yet reached an optimal level as they are not spatially well integrated with one another in all the cases. The reasons for this might be poor market intelligence, slow transition of the information between the markets and poor physical infrastructure. The policy intervention calls for strengthening market intelligence wing in all markets along with the establishing of online marketing system through computerization and networking. The market price information should be made available to the stakeholders through electronic and print media. Development/strengthening of market infrastructure including transportation and communication facilities are the need of time in order to fully integrate the market prices.