Abstract

Spiraling prices of onions in India undermine the sustainability of current economic growth process and raised the question of price integration among the spatially separated markets. Co-integration test has been used to identify whether onion markets in India share a common linear deterministic trend and the law of one price holds true in view of rising prices in the recent past. The study sourced the wholesale daily prices of major onion markets across the country from January 2010 to March 2011. Augmented Dickey Fuller test statistic has been used to check the presence of a unit root in the time series data. Empirical results indicated the presence of unit root and a strong spatial integration between major markets. The study also confirms the law of one price in Indian onions.

Key words: Co-integration, onion, law of one price.