Market Integration and Price Transmission in India’s Sugar Sector: A Wholesale and Retail Market Analysis

Abstract

This paper examined the price dynamics and market integration in wholesale and retail sugar markets of India using monthly data from the Food and Agriculture Organization for four major markets from 2014–2015 to 2023–2024. Understanding these dynamics across spatially separated markets is crucial for developing policies that enhance market efficiency and promote sustainable growth. Various analytical tools were employed viz. compound annual growth rate, instability index, seasonal price index, correlation analysis, Johansen’s co-integration test, and Granger causality test and impulse response function. The analysis demonstrated that the selected sugar markets exhibit suboptimal integration due to limited market intelligence, slow information flow and inadequate infrastructure. An upward trend was observed in sugar prices in all the markets over the study period. Seasonal price fluctuations were observed, linked to the crushing season and higher demand during summer months. Co-integration analysis confirmed a long-run equilibrium, Granger causality test revealed unidirectional, bidirectional and no causality price influence between the markets. Moreover, impulse response analysis concluded relatively well interconnected markets with potential inefficiencies, particularly in Patna market. This study uniquely highlights the interplay between market efficiency and seasonal fluctuations in the Indian sugar sector, providing a nuanced understanding of spatial integration and its policy implications. To enhance market integration and price convergence, policy recommendations include modernizing marketing systems, fostering public–private partnerships, improving infrastructure, strengthening supply chains and facilitating external trade.