Abstract:
The impacts of trade liberalization policies have mainly reflected
in prices and it has been argued that increased integration between the
domestic markets and the world markets would result in increased
volatility in domestic prices. In the context of ASEAN-India FTA, this
paper analyzed the price volatility of black pepper and its transmission
to domestic market and prices received by the producers. The levels of
instability are found significant for most of the price series of black
pepper and the volatility of international prices have increased
considerably in the recent past. The cointegration analysis suggested
that liberalization has improved the transmission of price signals
between the domestic and the international markets and there is comovement
of prices. The decomposition of the variance in producer
prices proved that Export Unit Values and Import Unit Values were the
major factors which explained variations in producer price of pepper.
Hence, allowing imports of pepper under the ASEAN India FTA would
be detrimental to the producers and will make them vulnerable to market
instabilities. The uncertainty in prices as a consequence of increased
instability will make the farming community apprehensive and may
result in farmers moving away from pepper cultivation. The paper calls
for all the agencies concerned with the sector to formulate strategies to
bring back the prestigious position India had in the world pepper
economy. This necessitates policies not only on production technology
but also on marketing and price stabilization mechanisms.
