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Abstract

Primary agricultural-markets may be prone to large seasonal price drops when certain constraints inhibit farmer-sellers from behaving as rational economic agents. As several Asian countries are reeling under acute agrarian distress, this study focuses on India to conduct disaggregated univariate time-series analysis on the seasonal component of four major agricultural commodity prices in over 300 wholesale markets (mandis) using monthly data spanning more than a decade (2003-2016). Adapting from recent contributions made to seasonality estimation in short samples, the study tests harvest-pattern based specifications of seasonality (viz. trigonometric and saw-tooth functions) against an unrestricted dummy-variable specification to reduce estimation bias. Empirical results show considerable variation in magnitudes of seasonal price gaps (SG) across space and commodity. In several cases, they are higher than in international prices. A cross-sectional analysis of the estimated SGs over socio-economic indicators reveals that seasonal price drops have a direct relationship with the proportion of smallholders in a district. This has adverse implications for inequality and welfare. Furthermore, SGs are lower in the districts which have relatively higher access to credit. The work concludes that effective delivery of policy necessitates location-specific approaches. Continuing with blanket policy responses to the agrarian crisis may aggravate existing inequalities.

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