Pricing to market behaviour of India's high value agri-food exporters: an empirical analysis of major destination markets

Abstract

The pricing behaviour of India's high value agricultural and food exporters in their major destination markets is examined using a pricing-to-market (PTM) model for noncompetitive and exchange rate related pricing behaviour. The analysis was undertaken in a context where India is showing high commodity concentration in agricultural trade. The econometric analysis employed is panel corrected standard errors (PCSE) estimation technique. The results indicated evidence of a greater degree of imperfect competition either through price discrimination across destinations or through imperfect exchange rate pass-through. The analysis of exchange rate effects showed that the local currency price stabilization by the Indian exporters were more prominent than the amplification of exchange rates. The analysis of the asymmetric effects of exchange rates on export prices showed that in most cases the depreciation of Indian rupee had a greater impact than the appreciation. Moreover the results showed that the exchange rate pass-through is sensitive to the kind of exchange rate index utilised. In our analysis we found that the commodity specific exchange rate better predicts the pricing to market behaviour in most cases.