Sunil Jain: United prices of India

PERSPECTIVES

While many still believe high levels of octroi and other such barriers result in a situation where India's markets are fragmented, research from ICRIER shows this is not true. The exercise gives a value of 1 for the state with the lowest price, and the value given for the others is relative to this. So, for instance, if the centre chosen in Bihar had the lowest price of a commodity, the value assigned to this is 1 while that for Chhatisgarh will be 1.06 since the price index for All Commodities here was 6 per cent higher in 2004. The exercise shows that the difference between the cheapest (Bihar) and the highest (West Maharashtra) was 47 per cent for all commodities in 2004 "� but West Maharashtra was an outlier, and if you remove this, the next most expensive state (Rajasthan) had prices that were 18 per cent higher. Since prices for the same number of commodities were not available for 1994, a smaller set was used while doing the comparison over time. In this dataset, the range of prices across states was 1-1.2 in 1994 (All Commodity prices in Rajasthan were 1.2 times those for Andhra Pradesh which had the lowest prices) and this fell to 1-1.06 in 2004; for manufactures, the range fell from 1-1.30 to 1-1.07. That is, prices converged across states over the decade.