Presented at the Pulses for Sustainable Agriculture and Human Health” on 31 May-1 June 2016 at NASC, New Delhi, India. The conference was jointly organised by the International Food Policy Research Institute (IFPRI), National Academy of Agricultural Sciences (NAAS), TCi of Cornell University (TCi-CU) and Agriculture Today.

1. Cooling effect of Pulse
Imports on Domestic
Prices
By
Akanksha Negi, Devesh Roy and Raj Chandra
International Food Policy Research Institute
Raj Chandra
20-06-2016

2. Imports and Inflation
 Trade fills the gap between production and consumption and can also
contribute to cool down inflation (Gokarn, 2011)
 Has been employed as a tool to stabilize prices for a spectrum of food
products facing price pressures
 In case of potential threat of significant price rise, trade policy has
been quick and large
 When price pressure was faced on wheat in 2006, 6 million tons was
imported from Australia
 Edible oil is another example
 Stop-gap import of milk, sugar, onion and other vegetables represents
common policy stance
Raj Chandra 20-06-2016

3. Imports and Domestic Price Dynamics:
A quick look
 Annual shortage of around 2-3 million tons of pulses over the past
decade
 Demand outspacing supply both at aggregate level and across variety
resulted in persistently high prices
 Liberal trade policy has been adopted in case of pulses since 2000
 Import has maintained a steady growth of 36 percent over the past
decade
 Evolution of pulse import coincided with persistent increase in prices
 To what extent have imports cooled domestic market in pulses is an
interesting question to explore
Raj Chandra 20-06-2016

4. Imports and Domestic Price Dynamics:
A quick look contd..
Pulses Total Import Pulses WPI
20-06-2016Raj Chandra
0
0.5
1
1.5
2
2.5
3
3.5
4
4.5
Quantityinmilliontons
0.0
50.0
100.0
150.0
200.0
250.0
2005 2006 2007 2008 2009 2010 2011 2012
WPI
Pulses WPI

5. Objective
 How imports of pulses have affected their domestic
prices?
 What is the nature of effect on pulse prices? Do imports
bring down prices or just slow their rate of increase?
 What is the time span for imports to have a bearing on
price of pulses?
20-06-2016Raj Chandra

6. Methodology
 We employ basic Vector Error Correction Model
Steps:
 Stationarity: Traditional unit root test- DFGLS & KPSS
Test for unit root in the presence of structural break-zivot andrews
 Cointegration: Johansen’s cointegration test to find the order of integration
 VECM was employed to study the dynamics between pulses import and domestic prices
 VECM allows to delineate the short run as well as long dynamics
 Impulse response graph to visually interpret the short term adjustment by imports to shock in
price and vise versa
 The cointegrating equation provides the estimate for long run import price equilibrium
relationship
Raj Chandra 20-06-2016

7. Data and Variables
 Time Period: 2002-2012
 Data Sources:
Imports: Customs Dataset (Government of India)
Domestic Prices: Centre for Monitoring Indian Economy Pvt. Ltd (CMIE)
Market Arrival: Centre for Monitoring Indian Economy Pvt. Ltd (CMIE)
 Variables:
Imports
Domestic Prices
Market Arrival (Principal Market)
 Frequency: Weekly
20-06-2016Raj Chandra

8. Import and Price Dynamics: 2002-2012
Green Gram
5.566.577.5
logPrice
2468
10
logImport
2002w1 2004w1 2006w1 2008w1 2010w1 2012w1
Date in weeks
log Import log Price
Import and Domestic Price of Green gram
20-06-2016Raj Chandra

9. Import and Price Dynamics: 2002-2012
Pigeon pea
20-06-2016Raj Chandra
66.577.5
logPrice
468
1012
2002w1 2004w1 2006w1 2008w1 2010w1 2012w1
Date in weeks
log Import log Price
Import and Domestic Price of Pigeon pea

10. Import and Price Dynamics: 2002-2012
5.566.57
logPrice
2468
1012
logImport
2002w1 2004w1 2006w1 2008w1 2010w1 2012w1
Date in weeks
Import and Market Price of Chickpea
20-06-2016Raj Chandra
66.577.5
logPrice
2468
1012
logImport
2002w1 2004w1 2006w1 2008w1 2010w1 2012w1
Date in weeks
Import and Market Price of Black Matpe

11. Long Run Dynamics between Imports
and Domestic Prices

Raj Chandra 20-06-2016

12. Long Run Dynamics between Imports
and Domestic Prices Contd..

20-06-2016Raj Chandra

13. Impulse Response Functions- Pigeon Pea
Impulse variable: Prices
Response: Imports
Impulse: Imports
Response: Price
20-06-2016Raj Chandra

14. Seasonality and Imports: Case of Pigeon
pea
 Wide variation in prices is mainly driven by fluctuations in market arrival
 The nature of demand and supply for agricultural products creates instability
in prices for producers, consumers and income for farmers
 Seasonality is quite important in pigeon pea markets with highest arrivals
during January to March
 Lowest arrivals observed in the month of October
 Seasonality indices lower during April to June with lowest in the June (0.92)
(IIPR 2013)
 With seasonality trade can play important role in evening out prices
 Harvest season differs across countries: India- December to January;
Myanmar- January to February and East Africa- July to October
20-06-2016Raj Chandra

15. Seasonality and Imports: Case of Pigeon
pea
20-06-2016Raj Chandra
 Myanmar
2000030000400005000060000
Avg_Price
0
.05
.1
.15
Weekly_Import
2002w1 2004w1 2006w1 2008w1 2010w1 2012w1
Date in weeks
Import_Quantity Domestic_Price
 Tanzania
0200004000060000
Avg_Price
0
.002.004.006.008
Weekly_Import
2002w1 2004w1 2006w1 2008w1 2010w1 2012w1
Date in weeks
Import_Quantity Domestic_Price

16. Seasonality and Imports: Case of Pigeon pea
Contd..
20-06-2016Raj Chandra
 Low or almost negligible import are associated with the periods of high
domestic prices
 With imports coming, in the following period there is seems to be some
association in terms of moderating prices
 Big import spikes are associated with fall in prices in subsequent periods
 Import series displays a distinct floor in the import and price graph
 The density of log imports clearly shows a truncated distribution
 Effective way to deal with such truncated distribution is to consider the net
imports
 Export data limited as pulses export being restricted due to government
policy

17. Policy Implication
 Imports and prices needs to be considered in conjunction
 Clear evidence of import and price comovement
 A unitary shock in imports at first leads to a sustained increase in
prices up till 20 weeks, after which price stabilizes
 Expansion on extensive margin might speed up things
 Roughly imports’ role in cooling pulse markets reflect the reactionary
stance rather than a pro active disposition
 Import needs to be operationalized quickly as it takes some time to
bear on prices
20-06-2016Raj Chandra

18. Thank you!
20-06-2016Raj Chandra