Market Integration and Price Forecasting of Apple in India

The current study seeks to explore the degree of market integration through co-integration analysis on the wholesale weekly prices of three commercial varieties of Apple (American, Delicious and Moharaji) and their two important commercial grades (Special and Super) collected from five regional fruit markets of India during September, 2005 to February, 2013. The results reveal that apple markets are perfectly integrated, and the Delhi market is the dominant one. In the short run, a disequilibrium ranges from 2.1 to 96.9 per cent among all the varieties and grades of the selected fruits. However, the study finds no cointegration within two pairs of markets (Delhi-Srinagar and Bangalore-Kolkata) for the American Super variety and within one pair (Bangalore-Kolkata) for Moharaji Special. The Granger Causality Test reveals 39 and 18 bi-directional and uni-directional causations respectively under different market situations. Further, Vector Error Correction Model (VECM) results reveal a combination of positive and negative coefficients, though positive coefficients exceed the negative coefficients.