Stability Analysis of Raw Cotton Export Markets of India – Markov Chain Approach

Cotton is an important fibre crop of India which plays a dominant role in the country’s economy by meeting the domestic and export demands. It contributes significantly to both agriculture and industry in terms of farm income, employment and export earnings. India, despite being the third largest producer of cotton in the world, has not exploited its potential to emerge as a major player in the world raw cotton exports. The present level of exports is not consistent and exhibits high variations in volume and revenue earnings. In this paper, the dynamics of changes have been measured in the export of raw cotton from India to different export markets employing the Markov-Chain model. The results have shown China as the sole stable destination for our cotton exports. The other traditional importing countries such as Bangladesh, Germany, Indonesia, the UK, Japan and Korea have recorded low retention probabilities during pre- and post-economic reform periods, indicating unstable export share to these markets