Are Indian rice exporters able to price discriminate? Empirical evidence for basmati and non-basmati rice

Akash Issar and Poornima Varma

Applied Economics, 2016, vol. 48, issue 60, 5897-5908

Abstract: The role of exchange rate fluctuations on the pricing behaviour of Indian rice exporters in their major destination markets is examined using the pricing-to-market (PTM) model. The analysis was undertaken in a context where India has emerged as a leading exporter of rice in the world market. The study distinguishes between basmati and non-basmati rice in the analysis as the destination markets differ across these two varieties. One of the key contributions of this study is that it undertakes an analysis under 3 exchange rate models, they are: nominal, real and commodity-specific exchange rates. The results from our analysis indicated the presence of non-competitive pricing behaviour of India’s rice exporters in majority of destination markets due to both the market-specific characteristics as well as exchange rate-induced effects. The amplification of exchange rate effects was more prominent in commodity-specific exchange rate model whereas local currency stabilization was more prominent under nominal and real exchange rate models. Furthermore, the analysis showed that the commodity-specific exchange rate better predicts the PTM behaviour of rice exporters.

Date: 2016
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DOI: 10.1080/00036846.2016.1186798

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