ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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Not Our Cup of Tea Anymore?

Emerging Trends from Trade

Owing to both internal (skewed production and export basket) and external (rising imports, growing competition) challenges, India’s share in global tea exports is gradually declining. In this context, brand building and stricter compliance with global norms by the Indian players are necessary.

To celebrate 200 years of the Assam tea industry, the state government has proposed various events in major Indian cities as well as abroad, in its 2023–24 budget, to promote the brand effectively (Economic Times 2023). It is ironic that in this landmark year, Indian tea is also witnessing a defining challenge. The rising import of cheaper varieties of tea from Nepal, through the preferential route of zero-tariff rate, has received attention of late. With a substantial proportion of these imported varieties being tactically classified as “Darjeeling tea” for selling in the local market, the stress on domestic producers is obvious (Manna 2023). Conversely, the export opportunities are getting thinner in traditional markets, resulting from intense competition from Sri Lanka, Kenya, and other African countries, on the one hand, and global dynamics, such as reduced sales opportunities in Russia and Ukraine, on the other. As a result, India’s share in global tea exports has declined from 19.5% to 14.5% over 2011 to 2021.

With the Sustainable Development Goals’ (SDGs) compliance deadline app­roaching and the demand for organic produce with a price premium rising, the Indian tea exporters ideally stand to benefit by adopting required standards and promoting their own brand. However, early introduction of environment-sensitive innovations by competitors (like Kenya, Malawi) and recent negative publicity on the quality of Indian tea, including concerns over maximum residue limit compliance for pesticides, have influenced the demand from retailers in the West (Saha and Kerketta 2023). Considering the recent developments, the target set by the tea board in 2022, to increase sectoral exports from 195.5 tonnes in 2021 to 300 tonnes in 2025, looks far too ambitious (Telegraph 2022). While the COVID-19-related trade disruptions and Russia–Ukraine war caused an unanticipated shock for Indian tea exporters, the systemic challenges were also restricting the sectoral growth for some time. The wage implications of the Plantations Labour (PL) Act, 1951 and the dominance of black tea in production and export baskets have influenced the growth potentials (Ethical Tea Partnership 2019). The lower growth trajectory resulted in reduced working capital, which in turn compelled the domestic players to become risk-averse, which in turn has limited the risk-taking abilities of the domestic players. Given this background, we comment on the emerging trends from the sectoral trade dynamics.

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Updated On : 3rd Oct, 2023
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