Indian Tea in Global Market

By Barua, Nissar A.; Mazumder, Mukta | Review of Management, June 2013 | Go to article overview

Indian Tea in Global Market


Barua, Nissar A., Mazumder, Mukta, Review of Management


(ProQuest: ... denotes formulae omitted.)

Introduction

Historically in colonial India tea cultivation was introduced and subsequently promoted as an export oriented commodity. Tea export in India made a beginning when in 1839, the first batch of Indian tea was sent to London for auction. Since then India has been exporting tea to most of the tea consuming areas of the world including Europe, America, West Asia, Africa, and Australia. Over the years India had always dominated the global tea export market as the single largest exporter of tea. However since 1990 its market share in the global tea export started falling in a dramatic fashion. The plummeting fortune of Indian tea in the world export market is evident in the decline in its share from 20.86 percent in 1986 to 12.34 percent in 2008 (Tea Board of India, online: accessed during 2007-2011). The declining importance of tea as an agricultural export is also evident in the fall in its share in India's total agricultural export from 19.05 percent in 1986 to 3.7 percent in 2008.

The falling export of Indian tea had reduced the proportion of exports in the total tea produced in India from 32.72 percent in 1986 to 20.17 percent in 2008. To revive India's tea export to its former level and to reclaim its dominant status in the global tea market it is imperative that an appropriate strategy is adopted to address the problems that confronts the tea industry. Devising an appropriate strategy requires exploring the factors, responsible for the declining share of exports of Indian tea, and conversely, increasing market share of the competing tea exporting countries. In this backdrop, the paper attempts to asses and evaluate the performance of India's tea export market. It seeks to identify the factors affecting India's tea exports and measure their influence.

The paper has been organized into six sections. The objectives of the paper are stated in Section-2. Section-3 has been devoted to the conceptual framework of the study. A brief account on the growth of the global tea market and India's performance in it is presented in Section-4. In this section a regression analysis is undertaken to determine the impact of the growth of the world export market on the volume of India's tea export. Section-5 discusses the relative share of major tea exporting countries in the global market. The impact of competing countries on tea export of India is estimated on the basis of a multiple regression model.

Objectives of the paper

The objectives of the paper are

* To analyze the growth of India's tea export in the context of the global market.

* To estimate the impact of competition from major tea exporting countries on India's tea export.

* To prepare a Revealed Comparative Advantage Index of the major tea exporting countries.

Conceptual Framework

Trends in production, consumption, and export of tea in India are estimated on the basis of the Compound Annual Growth Rate. A comparative analysis on the competitiveness of all major tea exporting countries are undertaken on the basis of the Revealed Comparative Advantage Index (RCA), which is calculated as

...

Wherein

X,t= ith country's export of tea,

Xwt= world export of tea

Xi= total merchandise export of country i,

Xw= total world merchandise export

A simple regression analysis is undertaken to determine the impact of the global tea market on India's exports. A multiple regression analysis is undertaken to determine the impact of major tea exporting countries on India's share in world export. In the analysis the stepwise backward method as available in the SPSS software is adopted to test the model in several stages. Initially all the predictors in are tested for significance and the outcomes are assessed in terms of a removal criterion. Predictors which are non-significant are successively dropped from the model as it is progressively tested. …

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