ABSTRACT
As discussed in Chapter 6, during the post-reform period, competi-tiveness of most of the agricultural commodities had undergone considerable change. It shows a dynamic trend depending upon changes in international and domestic market prices. For example, the competitiveness of most of the agricultural commodities, which improved significantly during the early 1990s, was affected adversely during the post-WTO period with a sharp decline in international prices. The extent to which international prices had influence on domestic prices during the period depends upon the government intervention in the form of policies either at the border or as price support mechanisms which have potential consequence of weakening the link or preventing transmission of the effects of international price movements. Apart from international prices, government policies also affect the domestic prices both directly and indirectly. Typically, indirect effects result from the impact of macroeconomic policies on the exchange rate, whereas direct effects result from impact of government intervention in agriculture in pursuance of its objective of keeping domestic prices at ‘reasonable levels’.
