Price Dynamics and Extent of Integration in Indian Retail Milk Markets

Abstract

Market integration plays a vital role in determining how spatially related markets respond to price changes and shocks. This study examines the cointegration and price transmission dynamics across four major Indian retail milk markets Andhra Pradesh, Karnataka, Haryana, and Punjab using monthly data from April 2014 to April 2025. The analysis reveals a consistent upward trend in retail milk prices, with Haryana recording the highest and Karnataka the lowest prices, largely due to Karnataka’s strong cooperative pricing system. Granger causality tests indicate asymmetric interstate price transmission, with Andhra Pradesh and Punjab acting as significant unidirectional influencers. Johansen cointegration analysis confirms a stable long-run equilibrium among these markets, highlighting stronger integration within southern states and contrasting long-term effects from northern dairy hubs on Andhra Pradesh. Vector Error Correction Model results identify Karnataka and Punjab as key transmitters of short-term price shocks, underscoring their critical roles in national dairy price dynamics. The findings suggest that while long-term price adjustments vary regionally, short-term shocks propagate rapidly, emphasizing the need to strengthen cooperative networks, supply chains, and market intelligence to enhance price stability and market integration.