Market Analysis and Price Dynamics in Perishable Crop Supply Chains in India

Applying a standard vector autoregressive model and the Granger causality test to long-ranging monthly price and market arrival data of a perishable crop (tomato) for eighteen major Indian cities, this paper examines the dynamics of price transmission across wholesale-retail supply chains of the crop, evaluating the interconnectedness between its market arrivals and wholesale and retail prices.Doing so, it tries to indicate the proximate reasons for the variability in tomato prices in the country.The prices and market arrivals of tomatoes are characterized as stationary series with substantial asymmetry and nonnormality in their distributions.The results show that while the retailers set their prices based on wholesale prices, the wholesalers were influenced by the price signals from retail markets in setting their prices and adjusting the quantity of tomatoes they released onto the market.While market arrivals of the crop influenced the prices in a majority of the cities, the prices also influenced market arrivals in several cases, indicating that variability in the availability of the crop contributed to the volatility in prices, which might have been intensified by the traders' market power, enabling them to control their availability in the markets.The policies to reduce price variability and enhance market integration and efficiency need to be directed towards ensuring regularity in the availability of the crop, facilitating trade, improving infrastructure facilities, and reducing restrictions on information sharing and movement of the commodity across markets.