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<p>Tea, the world’s second most consumed beverage after water, holds substantial economic and cultural importance in India. Despite its prominence, the Indian tea market experiences persistent price fluctuations driven by global demand volatility, inefficiencies and structural rigidities in marketing channels. This study examines price transmission across auction, wholesale, and retail markets using monthly data from 2014 to 2023 within a panel econometric framework. Panel cointegration tests confirm a long-run equilibrium relationship, particularly between wholesale and retail prices, indicating a structurally integrated marketing chain. Long-run estimates derived from Fully Modified Ordinary Least Squares (FMOLS) and Dynamic Ordinary Least Squares (DOLS) identify wholesale prices as the primary determinant of retail price formation, while auction prices show comparatively limited downstream influence, suggesting frictions in upstream price discovery. Panel causality tests and impulse response functions (IRF) reveal a hierarchical transmission mechanism in which price shocks predominantly flow from wholesale to retail markets, with auctions remaining relatively exogenous. Wavelet coherence identifies a persistent wholesale-led retail linkage, with primary market signals transmitted gradually through wholesale channels. Overall, the findings underscore the pivotal role of wholesale markets as leading indicators of retail price movements while emphasizing the need for reforms to improve auction efficiency through enhanced price dissemination, digital trading platforms and deeper regional integration, thereby strengthening market efficiency and promoting more equitable value distribution across the tea supply chain.</p>

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Understanding price dynamics of the Indian tea market evidence from panel econometric analysis

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  • 发表日期：

    2026年4月4日

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  • Soumik Dey,
  • Kanchan Sinha,
  • Aniruddha Sarkar,
  • Rachayeeta Barua,
  • Abhaya Singhamahapatra,
  • Pradip Kumar Sahu

摘要

Tea, the world’s second most consumed beverage after water, holds substantial economic and cultural importance in India. Despite its prominence, the Indian tea market experiences persistent price fluctuations driven by global demand volatility, inefficiencies and structural rigidities in marketing channels. This study examines price transmission across auction, wholesale, and retail markets using monthly data from 2014 to 2023 within a panel econometric framework. Panel cointegration tests confirm a long-run equilibrium relationship, particularly between wholesale and retail prices, indicating a structurally integrated marketing chain. Long-run estimates derived from Fully Modified Ordinary Least Squares (FMOLS) and Dynamic Ordinary Least Squares (DOLS) identify wholesale prices as the primary determinant of retail price formation, while auction prices show comparatively limited downstream influence, suggesting frictions in upstream price discovery. Panel causality tests and impulse response functions (IRF) reveal a hierarchical transmission mechanism in which price shocks predominantly flow from wholesale to retail markets, with auctions remaining relatively exogenous. Wavelet coherence identifies a persistent wholesale-led retail linkage, with primary market signals transmitted gradually through wholesale channels. Overall, the findings underscore the pivotal role of wholesale markets as leading indicators of retail price movements while emphasizing the need for reforms to improve auction efficiency through enhanced price dissemination, digital trading platforms and deeper regional integration, thereby strengthening market efficiency and promoting more equitable value distribution across the tea supply chain.