price dispersion. Two actions could help reduce information frictions. Strengthen information platforms: in particular cell phone and internet coverage. While results reported here focus on cell phone coverage (due to data availability), it is likely that internet coverage also plays a role in providing information that reduces arbitrage opportunities. In addition, encouraging information provision initiatives will help. In this area, both the private sector and the Government of India have been implementing initiatives towards the provision of information on market conditions (as well as technical assistance) through mobile phone and online platforms. These efforts seem to be helpful, particularly in remote locations, where physical connectivity is a challenge.

Third, evidence unveiled here reveals a state‐border effect on prices that adds to the transportation bill the equivalent of having to drive an extra 164 kilometers. This result suggests that crossing state borders is costly, sizably impacting food prices. Reconsidering state border crossing barriers, streamlining procedures, and moving controls to the source and destination rather than at the border could help increase integration. In this respect, evidence reported by World Bank (2016) suggests that were all state border crossing procedures and documentation to be eliminated, logistics costs and transit time would fall by around 10‐15 percent, enabling at least another inventory turnover for the logistics supply chain. Other indirect gains are also stressed, related to the reduction of the fragmentation of the logistics markets in India. Results by Van Leemput (2014) also point in this direction. The author estimates that domestic trade frictions make up 30 percent of the total trade costs on average, and their removal would increase welfare by about double as much as the removal of barriers to international trade. The recent implementation of the GST that aims at reducing internal trade frictions is already showing positive effects on reduced transport costs and increased domestic trade (Krishna and Van Leemput 2018a; Krishna and Van Leemput 2018b).

Fourth, results reported here on substantial (although imperfect) food price co‐movements spatially, and vertically – from wholesale to retail, call for re‐evaluating government intervention in internal and external trade in agricultural commodities, while maintaining its role of price stabilization. If agricultural commodity markets are spatially integrated, then producers and consumers will realize the gains from this liberalization, since price signals will be transmitted through the marketing channels. In fact, for the commodities in which there is substantially more intervention – wheat and rice – our findings suggest substantially slower transmission of price signals than for those with relatively more liberal trading schemes – e.g., grams or edible oils (similar conclusions have been reached by Ghosh (2010) or Sekhar (2012), their contributions are discussed in Section 2 of this paper). By limiting interventions, the government could reduce costs without substantial effects to be expected on market performance. These limited interventions could mean, for example, managing relatively small quantities of buffer stocks in certain key locations to ensure food security. Government interventions could re‐focus on reducing transport and logistics costs, facilitating the provision of market information, and reducing barriers to domestic trade, as suggested above. To be sure, this last suggestion is based on a qualitative reading of the results presented here, as well as of the existing literature on the matter. However, in this paper no link has been identified formally between government intervention and departures from market integration.

Further research into the effects of the implementation of GST on market integration and price dispersion in India would be useful to better understand the benefits of policies aiming at integrating markets.

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