Abstract
This chapter examines the nature and the extent of price deviation across regions for select tradable commodities in India. For commodities like rice, sugar, washing soap and kerosene, results indicate substantial deviations in prices across regions. It is observed that cross-sectional deviations in prices of these commodities, measured in terms of statistics like relative mean deviation or coefficient of variation, are highly persistent over time. Results reveal that transportation cost and common fiscal policy for regions within a particular state boundary could explain only a small part of the variations in regional price deviations and its persistence. These results highlight the importance of local factors (e.g. local taxes like municipal taxes or octroi, existence of entry barriers due to local monopolies, local supply shocks etc.) in price formation in India. The importance of local factors on regional prices reinforces the structuralist logic of curbing inflation rates through appropriate fiscal and administrative policies rather than by a centralized monetary policy.
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Acknowledgements
The study was financed by a seed money project (No: SM-202) of Indian Institute of Management Lucknow (IIML). The author would like to thank Sushil Kumar Yadav and Neha Raj for arranging the data analyzed in this study. The author is also grateful to seminar and conference participants in IIML and Institute of Development Studies Kolkata (IDSK) for various comments and suggestions that led to significant improvements in the exposition. Views expressed in the chapter are personal and do not reflect the views of IIML. The responsibility of any error lies with the author.
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Appendices
Appendix A
Cities/towns/regions from which data on regional prices are collected in India (Source: Das and Bhattacharya (2005))
State | Cities/towns/regions |
|---|---|
Andhra Pradesh (6) | Godavari Khani (18°33′, 79°27′), Guntur (16°18′, 80°27′), Hyderabad (17°23′, 78°29′), Vijaywada (16°31′, 80°37′), Visakhapatnam (17°42′, 83°18′), Warangal (18°00′, 79°35′) |
Assam (5) | Tinsukia (27°30′, 95°22′), Guwahati (26°11′, 91°44′), Labac-Silchar (24°49′, 92°48′), Mariani-Jorhat (26°45′, 94°13′), Rangapara-Tezpur (26°38′, 92°48′) |
Bihar (1) | Munger-Jamalpur (25°24′, 86°30′) |
Chhatisgarh (1) | Bhilai (21°13′, 81°26′) |
Gujarat (5) | Ahmedabad (23°02′, 72°37′), Bhavnagar (21°48′, 72°06′), Rajkot (22°18′, 70°47′), Surat (21°10′, 72°50′), Vadodara (22°18′, 73°12′) |
Haryana (2) | Faridabad (88°26′, 77°19′), Yamunanagar (30°07′, 77°18′) |
Jammu and Kashmir (1) | Srinagar (34°05′, 74°49′) |
Jharkhand (6) | Bokaro (23°40′, 86°09′), Giridih (24°11′, 86°18′), Jamshedpur (22°48′, 86°11′), Jharia (23°45′, 86°24′), Kodarma (24°28′, 85°36′), Ranchi-Hatia (23°21′, 85°20′) |
Karnataka (5) | Bangalore (12°59′, 77°35′), Belgaum (15°52′, 74°31′), Hubli-Dharwar (15°21′, 75°10′), Mercara (12°25′, 75°44′), Mysore (12°18′, 76°42′) |
Kerala (3) | Ernakulam (10°01′, 76°19′), Mundakayam (9°36′, 76°34′), Quilon (8°53′, 76°36′) |
Madhya Pradesh (4) | Bhopal (23°16′, 77°24′), Chhindwara (22°04′, 78°56′), Indore (22°43′, 75°50′), Jabalpur (23°10′, 79°57′) |
Maharashtra (5) | Mumbai (19°00′, 72°48′), Nagpur (21°09′, 79°06′), Nasik (19°59′, 73°48′), Pune (18°32′, 73°52′), Solapur (17°42′, 75°48′) |
Orissa (2) | Angul-Talcher (20°49' , 85°06' ), Rourkela (22°13′, 84°53′) |
Punjab (3) | Amritsar (31°35′, 74°53′), Jalandhar (31°19' , 75°35' ), Ludhiana (30°54′, 75°51′) |
Rajasthan (3) | Ajmer (26°27′, 74°38′), Bhilwara (25°21′, 74°38′), Jaipur (26°55′, 75°49′) |
Tamil Nadu (6) | Chennai (13°05′, 80°17′), Coimbatore (11°00′, 76°58′), Coonor (11°21′, 76°49′), Madurai (9°56′, 78°07′), Salem (11°39′, 78°10′), Tiruchirapally (10°49′, 78°41′) |
Uttar Pradesh (5) | Agra (27°11′, 78°10′), Ghaziabad (28°40′, 77°26′), Kanpur (26°28′, 80°21′), Lucknow (26°55' , 80°59' ), Varanasi (25°20′, 83°00′) |
West Bengal (9) | Asansol (23°41′, 86°59′), Darjeeling (27°02′, 88°16′), Durgapur (23°29′, 87°20′), Haldia (22°06′, 88°06′), Howrah (22°35′, 88°20′), Jalpaiguri (26°31′, 88°44′), Kolkata (22°34′, 88°21′), Raniganj (23°37′, 87°08’), Siliguri (26°42' , 88°25' ) |
Chandigarh (1) | Chandigarh (30°44′, 76°55′) |
Delhi (1) | Delhi (28°39′, 77°13′) |
Pondichery (1) | Pondichery (11°56′, 79°53′) |
Himachal Pradesh (1) | The entire industrial belt of the state (31°06′, 77°10′) |
Tripura (1) | The entire industrial belt of the state (23°49′, 91°16′) |
Goa (1) | The entire industrial belt of the state (15°29′, 73°50′) |
Appendix B
Data on prices—errors in reported data and suggested corrections with comments
Article | Unit | Centre | Year | Month | Reported rice | Suspected actual price | Comments |
|---|---|---|---|---|---|---|---|
Rice | Kg | Jamshedpur | 2011 | March | 2141 | 21.41 | A clear case of decimal problem in original. The unit of actual measurement might have been quintal, but was reported as kg |
Kerosine oil | L | Tiruchirapally | 2010 | June | 0.00 | 0.00 | Took the reported price as the actual price |
Kerosine oil | L | Tiruchirapally | 2010 | July | 0.00 | 0.00 | |
Kerosine oil | L | Tiruchirapally | 2010 | August | 0.00 | 0.00 | |
Kerosine oil | L | Tiruchirapally | 2010 | September | 0.00 | 0.00 | |
Kerosine oil | L | Tiruchirapally | 2010 | October | 0.00 | 0.00 | |
Kerosine oil | L | Tiruchirapally | 2010 | November | 0.00 | 0.00 | |
Kerosine oil | L | Tiruchirapally | 2010 | December | 0.00 | 0.00 | |
Kerosine oil | L | Tiruchirapally | 2011 | January | Unavailable | 0.00 | As the previous months’ reported price was 0.0, so the same price was considered |
Kerosine oil | L | Tiruchirapally | 2011 | February | Unavailable | 0.00 | |
Kerosine oil | L | Tiruchirapally | 2011 | March | Unavailable | 0.00 | |
Kerosine oil | L | Nagpur | 2007 | March | Unavailable | 9.59 | The prices per litre were AÂ 9.59 in both January 2007 and February 2007. The same price of 9.59 per litre was reported from January 2008 to December 2008 |
Kerosine oil | L | Nagpur | 2007 | April | Unavailable | 9.59 | |
Kerosine oil | L | Nagpur | 2007 | May | Unavailable | 9.59 | |
Kerosine oil | L | Nagpur | 2007 | June | Unavailable | 9.59 | |
Kerosine oil | L | Nagpur | 2007 | July | Unavailable | 9.59 | |
Kerosine oil | L | Nagpur | 2007 | August | Unavailable | 9.59 | |
Kerosine oil | L | Nagpur | 2007 | September | Unavailable | 9.59 | |
Kerosine oil | L | Nagpur | 2007 | October | Unavailable | 9.59 | |
Kerosine oil | L | Nagpur | 2007 | November | Unavailable | 9.59 | |
Kerosine oil | L | Nagpur | 2007 | December | Unavailable | 9.59 | |
Kerosine oil | L | Nagpur | 2009 | September | Unavailable | 9.70 | The price remained at AÂ 9.70 per litre between January 2009 and June 2010 |
Sugar | Kg | Guwahati | 2007 | March | 1917.00 | 19.17 | A clear case of decimal problem in original data for all these months. The unit of measurement might have been quintal, but was reported as kg |
Sugar | Kg | Guwahati | 2007 | April | 1910.00 | 19.10 | |
Sugar | Kg | Guwahati | 2007 | May | 1910.00 | 19.10 | |
Sugar | Kg | Bangalore | 2007 | June | 1525.00 | 15.25 | |
Sugar | Kg | Bangalore | 2007 | July | 1524.00 | 15.24 | |
Sugar | Kg | Bangalore | 2007 | August | 1525.00 | 15.25 | |
Sugar | Kg | Faridabad | 2009 | January | 2175.00 | 21.75 | |
Sugar | Kg | Kodarma | 2010 | March | Unavailable | 38.5 | The price per kg was A 40.5 in February 2010 and A 32.5 in June 2010. The prices for March–May were estimated through linear interpolation. A similar trend in other centres, especially those near Kodarma, was also observed |
Sugar | Kg | Kodarma | 2010 | April | Unavailable | 36.5 | |
Sugar | Kg | Kodarma | 2010 | May | Unavailable | 34.5 |
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Bhattacharya, K. (2014). Determinants of Price Deviations Across Regions in India. In: Khasnabis, R., Chakraborty, I. (eds) Market, Regulations and Finance. India Studies in Business and Economics. Springer, New Delhi. https://doi.org/10.1007/978-81-322-1795-4_11
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