How has the minimum support price policy of India affected cross-commodity price linkages?

Author(s)
Morales, Luis Emilio
Balié, Jean
Magrini, Emiliano
Publication Date
2021-02-02
Abstract
For several decades, the government of India has implemented a minimum support price (MSP) policy for agricultural commodities to reduce price risk levels for farmers. Concerns have been raised about whether this policy could affect market integration of related agricultural products, modify price incentives, and ultimately alter resource allocation and production between commodities. This study uses a panel vector auto-regression model across six states for the period 2002-2017 to analyse the effects of the MSP on the transmission of price shocks between cereals and oilseeds. The results demonstrate that the MSP partially and completely offsets price linkages between agricultural commodities, potentially introducing distortions in price incentives that affect land allocation and production between commodities. Beyond the effects of the MSP across commodities, Indian authorities can expect that price shocks on maize be transmitted to soybean over the next production period. Finally, this study demonstrates that the use of alternative data frequencies can identify differences in market reactions over time that can be related to production cycles and delays in price transmission.
Citation
International Food and Agribusiness Management Review, 24(2), p. 179-196
ISSN
1559-2448
1096-7508
Link
Publisher
International Food and Agribusiness Management Association (IFAMA)
Rights
Attribution-NonCommercial-ShareAlike 4.0 International
Title
How has the minimum support price policy of India affected cross-commodity price linkages?
Type of document
Journal Article
Entity Type
Publication

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