Abstract. In the era of globalization markets are connected to each other not only to compete domestic products with international products to increase economic stand but also export the required products. Therefore, in the recent years markets are more vibrant and transparent in integration with each other. Over the last couple of years, it has been seen that commodity prices have increased and remained highly volatile not only in international market but in India. Therefore, this paper examines the market integration and price transmission in India using the time series techniques of cointegration and vector error correction models. The study finds that there is both short-run and long-run relationship between domestic commodity index (all commodity index, energy index and metal index) prices and international commodity index (all commodity index, energy index and metal index) prices. But, there is no relationship between domestic agriculture index price and international agriculture index price. The study also finds that except the agriculture index price, the change in domestic commodity index (all commodity index, energy index and metal index) prices are due to the change in international commodity index (all commodity index, energy index and metal index) prices.

Keywords: market integration, transmission, cointegration, causality and volatility.