Dynamic Interaction Between Food and Fuel Markets in India: Has India Joined the Global Race?

Abstract

The study makes an attempt to investigate co-integrating relation between crude and three energy crops, namely sugarcane, soyabean, and wheat, for India for a sampled period from Jan 2011 to Dec 2020 by taking log-transformed daily closing spot prices. The dynamic relation between crude and energy crops is established using ARDL and non-linear ARDL (NARDL) co-integration techniques. The results revealed co-integration being established only for sugarcane with crop’s critical region improving from 5% to 1% when dummy representing break was included in the ARDL model. The asymmetric impact of crude on sugarcane was visible both in short and long run. Further, short-run results were in one direction only, i.e., a rise in crude was impacting prices of two crops, namely sugarcane and wheat, with no visible impact of any of energy crops on crude. The coefficient of error correction term (ECM(−1)) term for sugarcane was −0.005 which was negative and significant showing stability of equilibrium; however, adjustment speed was rather slow at 0.5% per period. The study recommends policy makers to harmonize and synergize energy and agricultural policies as both sugarcane and wheat are food staples in India. The country needs to develop a pre-warning and a crisis response mechanism regarding biofuel policies so as to avoid any food crisis situation as seen in early 2000 in some of the countries where energy crops significantly make way to biofuels.

Received: 22 August 2023 | Revised: 29 October 2023 | Accepted: 5 January 2024

Conflicts of Interest

The authors declare that they have no conflicts of interest to this work.

Data Availability Statement

Data are available on request from the corresponding author, Rakesh Shahani, by email.

Author Contribution Statement

Rakesh Shahani: Methodology, Software, Formal analysis, Investigation, Data curation, Writing - original draft, Writing - review & editing, Visualization, Supervision. Anishka Taneja: Conceptualization, Software, Validation, Formal analysis, Investigation, Resources, Writing - review & editing, Project administration. Biki Das: Conceptualization, Software, Validation, Formal analysis, Resources, Project administration.