Market efficiency and benefit distribution in medicinal plant markets: empirical evidence from South Asia

A large number of people rely on medicinal plants for maintaining their health and treating diseases. Official data on medicinal plant markets are, however, virtually non-existent and available local-level case studies do not allow generalisations. This study investigates the market efficiency and benefit distribution in the Nepal-India medicinal plant market by building a national-level dataset along the market chain from harvester in Nepal to regional wholesaler in India. Data were collected using open-ended questionnaires administered to medicinal plant harvesters (n=639), traders (n=166) and central wholesalers (n=90) in 15 districts in Nepal and regional wholesalers (n=53) in India. Results show indications of market inefficiency; there are spatial arbitrage opportunities and skewed distribution of net marketing margins. Harvesters operate with net margins at 34-55% of the Indian wholesaler price, while net margins for traders and central wholesalers are - 5-20% and 25-36%, respectively. There seems to be an exploitative relationship between central wholesalers and traders. The average annual value of unprocessed medicinal plant exports from Nepal is estimated at PPP US$39-159 million, making this the country's fifth most important export commodity; only a third of the potential government revenue is collected. It is argued that medicinal plants are currently neglected in national development interventions and policies in Nepal.