Law of One Price: Price Variation of Rice in West Bengal
Price Variation of Rice in West Bengal
Abstract
There is a saying that goes: rice and fish make a Bengali. West Bengal is a predominantly paddy growing state where 5,719,800 hectare of land is under paddy cultivation. The state of West Bengal has always contributed nearly 14-16 per cent of the all India production of rice and productivity of rice in West Bengal has always been higher than the all India average.
Significant variation in the price of rice has being observed across the state at every point in time. The data was gathered for the monthly variation in price of rice across 19 districts over a period of five years. The data broadly indicates that the prices in northern districts of the state such as Siliguri, Jalpaiguri and Darjeeling were higher than those of the other districts by a factor of approximately 30%.
The analysis suggested various reasons for these variations, including but not limited to transportation costs, transaction charges, seasonal variations, geographical barriers, access to information, influence of price of substitutes, high entry barrier, state intervention, as well as various other factors such as un-milled paddy flowing in from neighboring states at much lower prices and discrimination based on demography.
Prolonged presence of these significant differences in prices leads to the conclusion that there might be other factors which have prevented arbitrage and consequently the convergence of prices across the state.
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INDEX Particulars | Page No. | Introduction | 4 | Price Variation in Different varieties of Rice | 6 | Variation in Prices of Rice across locations | 7 | Sources of Price Variation | 8 | Conclusion | 12 | Appendix | 13 | Reference | 14 |
Introduction
West Bengal’s rural economy was characterized by rapid growth in the 1980s and early 1990s. The major features of growth, which was particularly marked in the rice economy of the State, were rapid growth in aggregate
Abstract
There is a saying that goes: rice and fish make a Bengali. West Bengal is a predominantly paddy growing state where 5,719,800 hectare of land is under paddy cultivation. The state of West Bengal has always contributed nearly 14-16 per cent of the all India production of rice and productivity of rice in West Bengal has always been higher than the all India average.
Significant variation in the price of rice has being observed across the state at every point in time. The data was gathered for the monthly variation in price of rice across 19 districts over a period of five years. The data broadly indicates that the prices in northern districts of the state such as Siliguri, Jalpaiguri and Darjeeling were higher than those of the other districts by a factor of approximately 30%.
The analysis suggested various reasons for these variations, including but not limited to transportation costs, transaction charges, seasonal variations, geographical barriers, access to information, influence of price of substitutes, high entry barrier, state intervention, as well as various other factors such as un-milled paddy flowing in from neighboring states at much lower prices and discrimination based on demography.
Prolonged presence of these significant differences in prices leads to the conclusion that there might be other factors which have prevented arbitrage and consequently the convergence of prices across the state.
| |
INDEX Particulars | Page No. | Introduction | 4 | Price Variation in Different varieties of Rice | 6 | Variation in Prices of Rice across locations | 7 | Sources of Price Variation | 8 | Conclusion | 12 | Appendix | 13 | Reference | 14 |
Introduction
West Bengal’s rural economy was characterized by rapid growth in the 1980s and early 1990s. The major features of growth, which was particularly marked in the rice economy of the State, were rapid growth in aggregate
References: * “Rural Commercial Capital”- Barbara Harris White, Oxford University press: 2008, pages 164-183 * “Handbook of agriculture- Indian council of agricultural research” - Indian Council Of Agricultural Research (2011)