Stability analysis of Indian cotton: An markov chain approach

Abstract

The present study attempts to examine the trade direction of cotton export. The markov chain analysis was attempted through linear programming method to assess the transition probabilities for major cotton markets for 12 years i.e. 2004-05 to 2015-16. The major Indian cotton export markets were categorized as stable markets (China, Bangladesh) and unstable markets (Italy, Thailand, Indonesia) based on the magnitude of transition probabilities. The major export markets for Indian cotton are China (79 per cent and 77 per cent) and Bangladesh (66 per cent and 78 per cent) respectively in terms of quantity and value. The increasing share of other countries clearly shows the need to explore and exploit the market potential of other countries. Efforts are also needed to improve the efficiency of production and quality in order to stabilize the markets and also to make the product acceptable and price competitive in other importing countries.