world market for india's agro - products - Pondicherry University ...

WORLD MARKET FOR INDIA'S AGRO - PRODUCTS
(A STUDY WITH REFERENCE TO TEA, COFFEE AND CASHEW KERNELS)
THESIS SUBMITTED TO PONDICHERRY UNIVERSITY
FOR THE AWARD OF THE DEGREE OF
DOCTOR OF PHILOSOPHY
IN
COMMERCE
BY
P. UNNEEN KUTTY
Gu~de and Supervisor
Dr. 5. MURUGESAN
DEPARTMENT OF COMMERCE
PONDICHERRY UNIVERSITY
PONDICHERRY.605014
May - 1993

DR. B. MURUGESAN,
Readet in Commetce,
Depattment 06 Commetce,
Pondichetty Uniuetdity,
Pondichetsy - 605 014.
CERTIFICATE
Thib ib to cetti6y that the thebib entiteed "WORLD
MARKET FOR INDIA'S AGRO-PROOUCTS (A STUDY WITH REFERENCE
TO TEA, COFFEE AND CASHEW KERNELS) ib a bona6ide tebeatch
wotk done by Mr. P. UNNEEN KUTTY duting the petiod 28-9-1987
to 27-9-1992 unden my b~ptkVi4i0n.
The bubject on which the thebib hub been ptepated
ib his otiginat wotk and it ha6 not ptevioudty 6otmed the
baAi6 60t the auatd, to any candidate, 06 any Degtee,
Diptoma, FeLtowbhip ot othet dimitat titte 06 any Univetbity
ot inbtitution.
Place: Pondichetty
Date : 2 p - J-- 1973
, &
Countetbigned
\,;~~L--
7. ,cy . L
,, i.3-1 J..

P. UNNEEN KUTTY. #.Corn,
U.G. C. Senioa Rebeatch Fettow,
Depaatment 06 Commesce,
Pondichesty Univesbity,
Pondicheshy - 605 014.
STATEMENT BY THE CANDIDATE
I
heseby state that the thebid entitted "WORLD
MARKET FOR INDIA'S AGRO-PRODUCTS (A STUDY WITH REFERENCE TO
TEA, COFFEE AND CASHEW KERNELS1 ib my ohiginat wosk and no
past 06 the thebib ha6 been dubmitted 60s the awabd 06 any
othes Degsee, Diptoma, Fettowbhip oh othes bimiLas title.
Place: Pondichesty
Date : 79- $- 199.3

ACKNOWLEDGEMENT
Fitst and Fotemodt, I exptedd my deep dende 06
gtatitude to Dt. I. Muaugrban, Readet in Commetce, Depattment 06
Commetce, Pondichetty Univetbity, my Guide and Supetvibot, who,
with his etudite wotdb and inbpitatiue countenance, made poddibee
to me to accomptibh thid.woth.
1 am gtatedut to Dt. 0. Rajagopatan, Pt06eb60t and
Head, Depattment 06 Commetce, Pondichetty Uniuetaity, who, atway4
dtebded in pteabing mien,
dischatged his pt06e4~0tiae dutieb to
the bedt 06 mine and to thia wotk.
I exptebd my heatt-belt thank6 to Dt. K. Chandta
Sekhata Rao, Readet i n Commetce, Depattment 06 Commetce,
Pondichetty Uniuetbity, who, with hid condttuctiue ctiticismb and
btittiant duggedtions, entiched this wohh.
I take gteat pteasute i n teminidcing about Dt.Shyan
Bhat, Readet in Economicb, Depattment 06 Economicb, Pondichetty
Uniuetb~ty and Dt. Uma Shankat Patnaih, SeniOt Lectutet i n
Economicd, Depattment 06 Economicb, Pondichetty Univetbity, who
pto6usety shed Light on me to conctude thid wotk buC~ebb6ueey.
I am thank6uL to Dt.S.Bashyam, Dethi Schoot 06
ECon0mi~6, Dethi Uniuetsity, Dt.Sidhatthan,
Institute 06 Economic
Gtouth, Dethi Uniuetbity and Dt.Mannohan Agatwat, Schoot 06
Intetnationat Studied, Jawahattat Nehau Uniuetdity, New Dethi,
who wete so benevoeent to didcubs with me.
iv

I am gheatty indebted to Mh.
1. Nagabhubkana Rao,
Mahket Rebeatch 066Lcea, Coddee Boahd 06 India, Bangafote, Mh. N.
Ranaduhai,
Commodity Advibot, UPASI, Ooty, Mibb.Sheeja,
Statidtical O66icet, Cabhew Expott Phomotion Councif 06
India,
Cochin and ate othea 066iciat4, without whobe 6kiendtinebd and
a66ection to me, thid wotk woutd have been unducce6d6ut.
I sincetety appaeciate the timety help tendeted by Mn.
M. Manichanaj, k4.Com., M.Phit., Depaatment 06 Commetce,
Pondichethy Univetbity and Mk. P.N. Udhaya Kunoh, M.B.A., School
06 Management Studies, Pondichetky Univeadity, without which, I
woutd have been uneaby.
I txptedb my heahtiebt thank6utnebd to my cotteagueb
and co-keaeatchetd Mh. K. Subhamanian, f4.Com., MR. D. Ibnaef,
M.Com., M.Phit., Mh. S. Elanhumahon, M.Com., M.Phit., and
Dt. Pafanichamy, Mihb. Matabika Deo, M. Com., M. PhiL., who wete
atwayb cheeaing me up with "Huktah".
I am thankgut to Mh. D.G. Ramafingam, RAMTEC,
Pandichefity, who, with hi6 envioub expettibe, typed thia wobk.
FinaLty, I am
much behotden to the Univehdity Gtant6
Commi66ion doh having awahded me
the Juniot Redeatch Fettowship
to undehtake thi6 wotk.
P. UNNEEN KUTTV

PAGE
ACKNOWLENMENT
LIST OF TABLES
CRAPTER
1 INTRODUCTION
2 INDIA'S FOREIGN TRADE - AN OVERVIEW
3 THE WORLD TEA MARKET
4 THE WORLD COFFEE MARKET
5 THE WORLD CASHEW MARKET
6 PRICE BEHAVIOUR
7 SUMMARY AND POLICY IMPLICATIONS
BIBLIOGRAPHY
APPENDIX

LIST OF TABLES
Table
Title
1.1 Regression Equations of India's Export supply
of Tea, Coffee and cashew kernels, for the
period, 1870 to 1988. 33
2.1 India's Exports - 1970-71 to 1989-90 60
2.2a Trends in the value of India's Principal
Exports - 1970-71 to 1979-80 61 - 62
2.2b Trends in the value of India's Principal
Exports - 1970-81 to 1989-90 63 - 64
2.3 India's Principal Exports - Annual Compound
Growth Rates 65
2.4 India's Foreign Trade and Exchange reserves -
1970-71 to 1989-90 86
2.5 World Trade and India's Exports - 1970 to
1989 67
2.6 World Exports by Country Groups - 1970 to
1989 68
2.7 India's Exports to Various Countries and
Regions - 1977-78 to 1988-89 69
2.8 India's Imports - 1970-71 to 1989-90 70
2.9a Trends in the value of India's Principal
Imports - 1970-71 to 1979-80 71
2.9b Trends in the value of India's Principal
Imports - 1980-81 to 1989-90 72
2.10 India's Imports - Annual Compound Growth
Rates 73
2.11 India's Terms of Trade - 1970-71 to 1985-86 74
2.12 Percentage Share of India's Exports and
Imports in GDP - 1970-71 to 1989-90 75

Table
Title
3.1 World Production of Tea (Country Wise) - 1970
to 1989
3.2 World Exports of Tea (Country Wise) - 1970 to
1989
3.3 World Production, Exports and Prices of Tea -
1970 to 1989
3.4 Imports of Tea for Consumption (Region wise)
- 1970 to 1989
3.5 Direction of India's Tea Exports - 1970-71 to
1989-90
3.6 Pattern of Tea Imports of Tea into U.K - 1970
to 1989
3.7a Percentage of Consumption of Tea and other
hot Beverages in the U.K
3.7b Growtti in use of Tea Bags (Percentage Share
of Total Market Volume)
3.8 Pattern of Imports of Tea into U.S.A - 1970-
89
3.9 Pattern of Imports of Tea into Canada -
1970-89
3.10 Pattern of Imports of Tea into Ireland -
1970-89
3.11 Pattern of Imports of Tea into Netherlands -
1970-89
3.12 Pattern of Imports of Tea into West-Germany -
1970-89
3.13 Pattern of Imports of Tea into France -
1970-89
3.14Pattern of Imports of Tea into Japan -
1970-89
3.15 Pattern of Imports of Tea into Australia -
1970-89

Table
Title
3.16 Pattern of Imports of Tea into New Zealand-
1970-89
3.17 Pattern of Imports of Tea into Saudi Arabia -
1970-89
3.18 Tea Imports for Consumption in Each Country -
1970-89
3.19 Imports of Indian Tea into Each Country -
1970-89
3.20 Regression Equations of Demand for Imports of
Tea for Consumption, Various Countries.
3.21 Regression Equations of Demand for Imports of
Tea for Consumption, Various Countries.
3.22 Regression Equations of Demand for Imports of
Indiun Tea, Various Countries.
3.23 Regression Equations of Demand for Imports of
Indian Tea, Various Countries.
3.24 Apparent Consumption bf Tea Per Head, Various
Countries
4.1 World Production of Coffee (Country Wise) -
1970 to 1990
4.2 World Exports of Coffee (Country Wise) -1970
to 1989 184 -
1.3 World Production, Exports, Imports and Pr~ces
of coffee - 1970 to 1989
4.4 Imports of Coffee into Varlous Countries -
1970 to 1989
4.5 All Importing Member: Imports of All Forms of
Coffee by Group - 1970171 to 1989/90
4.6 Direction of India's Coffee Exports - 1970-71
to 1988-89
4.7 Review of Consumption of Coffee in U.S.A
(Types and Regions) - 1970 to 1989

Table
Title
4.8 Review of Consumption of Coffee in U.S.A (Age
and Sex ) - 1970 to 1989.
4.9 Review of Consumption of Coffee in U.S.A
(Location and Time) - 1970 to 1989.
4.10 Regression Equations of Demand for imports of
Coffee for Consumption, Various Countries
4.11 Regression Equations of Demand for imports of
Coffee for Consumption, Various Countries
4.12 Per capita Coffee Consumption in Each Country
- 1970 to 1989
5.1 World Production of Cashew Nuts (Country
Wise) - 1970 to 1989
5.2 World Exports of Cashew Kernels (Country
Wise) - 1970 to 1989
5.3 World Production, Exports and Prices of
Cashew - 1970 to 1989
Imports of Cashew Kernels by Major Consumers
- 1970 to 1989
5.5 Ulrection of India's Cashew Exports - 1970 to
1989
5.6 Imports of cashew Kernels into U.S.A - 1970
to 1989
5.7 Imports of cashew Kernels into Canada -1970
to 1989
5.8 Imports of Cashew Kernels into U.K - 1970 to
1989
5.9 Imports of Cashew Kernels into the
Netherlands - 1970 to 1989
5.10 Imports of Cashew Kernels into Federal
Republic of Germany - 1970 to 1989
5.11 Imports of Cashew Kernels into Japan - 1970
to 1989

Table Title Page
5.12 Imports of Cashew Kernels into Australia -
1969/70 to 1987/88 232
5.13 Regression Equations of Demand for Imports of
Cashew for Consumption, Various Countries 233
5.14 Regression Equations of Demand for Imports of
Cashew for Consumption, Various Countries 234
5.15 Regression Equations of Demand for Imports of
Indian Cashew, Various Countries 235
5.16 Regression Equations of Demand for Imports of
Indian Cashew, Various Countries 236
5.17 Per capita Cashew Consumption in Various
Countries - 1970 to 1989 237
6.1 Auto-Correlation Co-efficients of the Firstdifferenced
price series (Pt-Pt-l=Et) - 24
lags 249 - 250

CHAPPER 1
INTRODUCTION
This chapter presents a brief account of tea,
coffee and cashew industries in India, problems of the
study, a review of the relevant literature, the specific
objectives of the study, the scope of the study, the
limitations of the study and the chapterisation scheme.
TEA INDUSTRY IN INDIA
India is the largest tea producer in the world.
During the year 1991, the country's tea production was to
the tune of 741.7 million kgs which accounted for about 28
per cent of the world production. Land area under tea
cultivation in the country is around 421.3 thousand
hectares. Yield per hectare in India is one of the highest
in the world to the tune of 1761 kgs per hectare.
Indian tea industry gives direct employment to
about 10 lakh workers and secondary employment to &round 30
lakh people.
In India, tea is marketed through four channels
viz., (1) sale by auction, (2) sale by mutual treaty, (3) by
forward sales with or through selling or buying agents and

(4) packaging and retailing the produce directly. Of these,
sale through auction is the most important channel. India
has eeven auction centres situated in Calcutta, Gauhati,
Siliguri, Amristar, Coonoor, Cochin and Coimbatore.
India is the largest consumer of tea among tea
producing countries and in the world. The country's
domestic tea consumption is estimated to the tune of 538.8
million kgs in the year 1991.
Tea ranks first among India's agro-exports.
India's tea exports stood at 210 million kgs in 1990 and
202.9 million kgs in 1991.
COFFEE INDUSTRY IN INDIA
India is ranked seventh among the twenty two
countries which produce more than 60 million kgs of coffee
per annum. During the year 1991-92, the coffee production
in India was to the tune of 210 million kgs which accounted
for 3.4 per cent of the world production. The land area
under coffee in the country is to the extent of 2.5 lakh
hectares which accounted for 1.8 per cent of the area under
coffee in the world. The productivity in the country is 921
kgs per hectare which is the highest but only after Costa
Rica, in the world.

During the year 1991, Coffee consumption in India
is estimated at 49.2 million kgs.
Indian coffee is reputed to be the superior in the
global market. During the year 1990-91, India's coffee I
exports was to the tune of 100.1 million kgs.
CASREW INDUSTRY IN INDIA
From the very beginning, cashew industry in India
was built up primarily dependiny upon import of raw cashew
nuts available from East Africa. In the year 1990, the
Industry imported 89 million kgs of cashew nuts for the
purpose of processing and re-exporting.
Cashew nut production in India is estimated to be
224 million kgs during the year 1990.
There are about 463 cashew processing units in
India with a total processing capacity of around 500 million
kgs of cashew nuts. Most of them are located In Kerala
State.
The cashew processing provides direct employment
to over 1.5 lakh persons. This is apart from the fact that
it gives attractive returns to thousands of cashew growers.

India's domestic cashew consumption is pronounced
to range between 15 and 20 per cent of the cashew produced
in the country.
India is the largest cashew kernel exporter in the
world, followed by Brazil. The country's cashew exports
stood at 49.5 million kgs in the year 1990.
STAT-
OF TIlB PBOBLgl
Simon Kuznets has clearly recognised the
importance of agricultural exports in the overall economic
development of an economy.
This type of contribution
arises, as Kuznets states; "when a given sector makes a
contribution to an econmy when it provides opportunities
for other sectors to emerge, or for the economy ,as a whole
to participate in the international trade and other
international economic flows, we designate this contribution
the market type because the given sector provides such
opportunities by offering part of its products on either
domestic or foreign markets in exchange for goods produced
by the other sectors at home or abroad.. ."'
An agriculture-predominant country like India has
to heavily depend on her agricultural sector to earn
1. Simon Kuznets, "Economic Growth and Contribution of
Agriculture: Notes on Measurement", International
Journal of Agrarian Affairs, Vo1.3, pp.59-75.

adequate foreign exchange for importing badly needed goods
and technology for the overall development of her economy.
As a matter of fact, the share of India's Agricultural and
Allied products, excluding agriculture-based manufacturers,
in her total export earnings st& at 28.9 per cent in the
year 1970-71, 32.8 per cent in 1974-75; then, it continued
to fall to 27.3 per cent in 1979-80, to 21.8 per cent in
1984-85 and to 15.7 per cent in 1989-90. However, the
shrinking share of the agriculture in the ~OInpoSition of the
country's export earnings during the period of the study
ought not to be misinterpreted. Because, the value of the
agricultural exports fairly quadrupled from US $586 million
in 1970-71 to $2531 million In 1989-90, showlng an overall
growth at a compound rate of 7.2 per cent. Further, around
40 per cent of the agricultural export earniqgs of the
country seems to be contributed by three crops viz., tea,
coffee and cashew kernels. Specifically, the share of tea,
coffee and cashew kernels together in the total agricultural
export earnings of the country was 50.8 per cent in the year
1970-71, 36.4 per cent in 1074-75, 37 per cent in 1979-80,
45.1 per cent in 1984-85 and 37.2 per cent in 1989-90.
Tea
India's exports of tea stood at 202.2 million kgs
in the year 1970, 219.4 million kgs in 1975, 224.0 million

kgs in 1980, 214.0 million kgs in 1985 and at 211.6 million
kgs in 1989 (International Tea Committee, London). The
trend shows that India's tea exports more or less stagnated
during the period as it grew only by a meagre compound rate
of 0.05 per cent. At the same time, India's domestic tea
production increased from 418.5 million kgs in 1970 to 684.1
million kgs in 1989, showing an overall growth at a
compound rate of 2.73 per cent (International Tea
Committee, London). In consequence, tea consumption in the
country fairly doubled from 221 million kgs in 1971 to 480
million kgs in 1989, showing an increase at a compound rate
of 4.36 per cent (Tea Board of India, Calcutta).
Looking at the arena of the world tea market, one
can find that the world exports and production (excluding
China) of tea increased considerably by a compound rate of
2.46 per cent and 3.04 per cent respectively during the
twenty year period of 1970 to 1989. But, some of the
important tea export markets stagnated or dwindled during
the period. For example, tea imports into United Kingdom,
Canada, Australia and Ireland decreased by a compound rate
of 1.67 per cent, 2.05 per cent, 2.12 per cent and 0.64 per
cent respectively during the period, 1970 to 1989. At the
same time, tea imports into U.S.A and the Netherlands were
not satisfactory as they grew by a compound rate of 0.99

per cent and 0.71 per cent respectively during the same
period. Nevertheless, some markets showed promising trends.
For example, imports of tea into Germany, Saudi Arabia, and
New Zealand increased by a compound rate of 3.21 per cent,
7.65 per cent and 2.25 per cent respectively during the same
period. Of course, the ever expanding world trade in tea,
the stagnancy in, or decline of, some of the traditional
markets and the increase in the imports of tea into nontraditional
markets reveal that there have been market
diversions during the period. And the tea prices in the
London Spot Market fluctuated widely during the period. It
dramatically rose from 63.55 pence per pound in December
1976 to 102.94 pence in December 1977, to 274.51 pence in
December 1984; then it Stdrted declining to 107.1 pence in
December 1088 but to rise to 159.36 pence it1 December 1989.
As a matter of fact, the increasing world tea
exports even at falling prices of the second half of the 80s
and the stagnant tea exports of the country yet at an
increasing domestic production, throw light on the fact that
India's tea exports were largely influenced by the demand
factors, rather than the supply factors during the period.
Coffee
India's exports of coffee positioned at a level of
28.7 million kgs in the year 1970, 48.5 million kgs in 1974,

60.9 million kgs in 1979, 64.7 million kgs in 1984 and at
102.3 million kgs in 1989 (FA0 Trade Year Book).
Specifically, it increased by a compound rate 4.77 per cent
in the twenty year period of 1970 to 1989. The country's
domestic coffee production nearly doubled from 110 million
kgs in 1970 to 215 million kgs in 1989, showing an overall
growth at a compound rate of 4.61 per cent (FA0 Production
Year Book). Interestingly, the country's domestic coffee
consumption increased from 33.6 million kgs in 1970 to 55.6
million kgs in 1988, showing an overall growth at a compound
rate of 3.11 per cent (The Coffee Board of India,
Bangalore).
The world exports and production of coffee
increased by a compound rate of 1.71 per cent and 1.89 per
cent respectively during the period, 1970 to 89. The
biggest coffee market, U.S.A, declined during the period.
The imports of coffee into U.S.A and Sweden decreased by a
compound rate of 0.76 per cent and 0.84 per cent
respectively during the period, 1970 to 1989. At the same
time, coffee imports into Canada increased by 1.6 per cent,
into Australia by 2.24 per cent, into United Kingdom by 0.92
per cent, into Spain by 4.23 per cent, into Japan by 7.23
per cent, into the Netherlands by 1.92 per cent, into Italy
by 2.49 per cent, into Germany by 4.18 per cent, into

France by 1.53 per cent, into Belgium by 3.63 per cent, and
into Switzerland by 0.28 per cent.
And the coffee prices in the New York Spot Market
fluctuated widely throughout the period and decreased in the
late 70s and in the 80s. It suddenly rose from 83.25 cents
per pound in December 1975, to 207.11 cents in December
1976; then it started falling to 121.21 cents in December
1980 and to 72.55 cents in December 1989 (International
Coffee Organisation).
Here, the ever increasing world coffee exports,
yet at falling prices and India's commendable coffee export
performance in such a world situation summon much of our
attention to the World Coffee Market.
Cashew Kernels
India's exports of cashew kernels stood at 54.1
million kgs in 1970, 59.2 million kgs in 1975, 36.9 million
kgs in 1980, 40.6 million kgs in 1985 and 43.9 million kgs
in 1989 (The Cashew Export Promotion Council of India,
Cochin). The trend during the twenty year period of 1970 to
1989 shows that it decreased by a compound rate of 3.41 per
cent. At the same time, India's cashew nut supply (it
includes both domestic production and imported raw cashew
nuts) decreased by a compound rate of 5.85 per cent during

the same period. It was because, the imports of raw cashew
nuts suddenly fell from 135.8 million kgs in the year 1975
to 76.2 million kgs in 1976 and to 18.4 million kgs in 1978.
The same trend continued till the mid 80s. After that, it
improved to 42.2 million kgs in the year 1989 (The Cashew
Export Promotion Council of Indla, Coctiin).
World exports of cashew kernels and world
production of raw cnshew nuts decreased by a compound rate
of 2 per cent and 1.99 per cent respectively during the
nineteen year period of 1970 to 1988. The biggest export
market for cashew kernels, U.S.A., more or less stagnated.
Imports of cashew kernels into U.S.A and Canada decreased by
a compound rate of 0 4 per cent and 4.13 per cent
respectively during the same period; while imports into
Australia, United Kingdom, Japan, the Netherlands and
Germany increased by 0.33 per cent, 1.86 per cent, 1.25 per
cent, 1.76 per cent and 1.77 per cent respectively during
the same period.
India's monopoly over the world cashew nut market
helped better her cashew kernel exports in the early and mid
70s: it was the emergence of 8razi12 as the potential
2. Exports of Cashew Kernels from Brazil increased from
6.5 million kgs in 1970 to 11.4 million kgs in 1975,
13.2 million kgs in 1980, to 20.7 million kgs in 1985,
to 37.4 million kgs in 1988 and to 32.0 million kgs in
1989.

supplier of cashew to the world market coupled with dwindled
exportable surplus of the same in the country which worsened
the country's cashew kernel exports in the late 70s and
throughout the 80s. Interestingly, it throws light on the
fact that the international trade in cashew kernels turned
to be more competitive even at reduced global supply.
And the cashew kernel prices in the New York Spot
Market oscillated, yet increased during the period. It rose
suddenly from 74 cents per pound in December 1972 to 126
cents In December 1973, to 290 cents in December 1981.
After that, it declined to 198 cents in kcember 1982, then,
it rose to the sky-high of 343 cents per pound In December
1986 but to decline to 268 cents in December 1988 (The
Cashew Export Promotion Council of India, Cochin).
In addition to that, the estimated Export Supply
~unctions~ (Table 1.1) reveal that India's tea and coffee
exports were largely influenced by the relative prices
(ratio of export prices to the internal prices) i.e.,
the
P XER
PwX-1 ER-1
3. x = @ + pr -!- + p2 ------- + p3 7 + E (See Appendix)
pix P,X-1
Where
Xs = Export volume of commodity X (1970=100)
PwX = World price of comodity X (1970=100)
PIX = Internal price of commodity X (1970=100)

higher the international prices than the internal prices,
the nwre the exports and vice versa. And the cashew kernel
exports were considerably influenced both by relative prices
and by the production capacity.
In view of the above discussion, the present study
is to deal with the world economic problems relating to
India's tea, coffee and cashew kernel exports.
DETKRMINrn OF EXPORT PERFORMANCE
UEVIEl OF LITERATURE
Broadly speaking, export performance of a country
is influenced by internal supply fnctors and by the external
demand factors.
A study of "India's Exports and Export Policies in
the 1960s" by Deeyak ~ayyar~ showed that the rapid growth in
Footnote 3 contd...
PwX-1 = Lagged world price of Commodity X (1970=100)
P X-1 = Lagged lnternal price of Commodity X (1970=100)
ER = The exchange rate (Rupee - Dollar)
-
Y = Production capacity (1970=100)
E = error term. q= constant
pl, pz and p3 are the estimated coefficients.
4. Deepak Nayyar, India's Exports and Export Policies in
the 1960s, Cambridge University K s , 1 9 7 6 , m -

world import demand for cashew kernels, iron ore, chemicals
and engineering goods was certainly one of the factors which
stimulated the exports of these commodities from India. He
added that many of India's major exports such as Jute
manufacturers, cotton textiles, tea, tobacco, manganese ore
and mica were faced by a very slow &rowing demand. Further,
he argued that sluggishness of world demand operated as a
constraint on the growth of India's traditional exports as
they accounted for almost half of India's total exports.
According to basic Economic theory, the level of
consumption in any country is determined by the following
factors, however, their relative importance may vary from
one country to another:
(i) the size of the population, its composition by rural
and town dwellers and its rate of growth
(ii) the level and increase in the real income of the
people
(iii) the real retail prices
(iv) income elasticity of demand
(v)
price elasticity of demand
(vi) shifts in the consumers preferences or habits
(vii) the availability of foreign exchange.

McGeehan5 has shown that the relative shares of
individual countries in the World Export Volume are
inversely related to their initial level of prices and
changes in their shares are related to changes in the
Comparative Export Prices of the different Countries. It
means that, ceteris paribus, the lower the level of a
country's export Prices put in relation to other prices at a
given time, the hi~her the country's export market share and
vice versa; the further increase (decrease) in the market
share is actuated by decrease (increase) in the export
Prices of a country put in relation to the Prices of other
exporting countries. It is ndr-worthy that price
flexibility is very important especially for securing orders
from new markets. As a matter of fact, once new trade links
are established, it is possible to raise prices gradually in
the new markets to the levels achieved in other markets.
Some economists have favoured costs rather than
prices as the main determinant of competitiveness. The main
determinants of costs are factor productivity and factor
prices. Therefore, at any given point of time, the
difference in costs of production as between competing
countries can be explained almost entirely in terms of
5. Joy M. McGeehan, "Competitiveness: A survey of Recent
Literature". Economic Journal, Vo1.78 (1968),pp.243-
59.

differences in factor productivity and differences in factor
prlces. For the same reason, over a period of time, a
country's cost competitiveness depends upon improvement in
factor productivity and the trend in prices of factors of
production in its export industries as compared to that of
its competitors. As a matter of fact, ceteris paribus, cost
of production in export industries always equals the export
prices.
Further more, McCeehan points out that non-price
factors such as quality, design and marketing are also
equally important in determining the competitive position.
Design can be interpreted to include performance,
reliability and appearance.
In marketing, it is essential
to know the specific requirement of consumers. The role of
marketing in increasing export sales is assuming greater
importance as the international market is becoming
increasingly competitive.
The willingness and ability to
adapt the production pattern in the shortest possible time
by making changes in design in response to fashion also
influence sales in the international market.
A study by Paul, vasant and ~ o t e showed ~ that
export competitiveness is closely associated with
Comparative Export Prices. They went to quantify the causes
6. Samuel Paul, L.Vasant and Mote, "Competitiveness of
Exports: A Micro-level Approach", Economic Journal,
V01.80 (1970), pp.895-909.

underlying the Net Domestic-Export Price (NDEP)
Differential. They found that a part of NDEP is explained
by the differences in the prices of inputs (e.g. raw
materials) and wage cost per unit of production between
India and her competitors. Another interesting finding in
the study was that more than 25 per cent of the remaining
unexplained price differences were nttributable to
difference between India and her competitors in the strength
of domestic demand. Thus, it is not uncommon for internal
prices to rise in response to the grbwing pressure of
internal demand. This, in turn, may adversely affect export
through its impact on their prices. The work done by
Balassa (which is referred to in the study just mentioned)
indicates that prices tend to move in line with the increase
in costs, but he also stressed that the strong pressure of
domestic demand may raise the price level even if there is
no increase in the cost of production. In such a situation,
the internal sales become more remunerative than export
sales.
Ball, Eaton and steuer7 have studied the impact of
internal demand pressure on British export - performance.
7. R.J. Ball, J.R. Eaton, M.P. Steuer, "The Relationship
Between United Kingdom's Export Performances in
Manufactures and the Internal Pressure of Demand ,
Economic Journal, Vo1.76 (September 1966), pp.501-18.

According to classical traditlonal view, an increase in the
domestic demand reduces the quantity available for exports.
This view is based on the assumption that domestic sales are
more remunerative than international sales. After removing
trend factors, they came to the conclusion that the shortterm
variations in the volume of British exports were
inversely related to the pressure of internal demand.
A study by smiths showed that it was the rate of
change rather than the absolute level of domestic demand
that influenced U.K.'s export performance during 1953-65.
Steur, Ball and ato on' have examined the effect of
waiting time (delivery data) on foreign orders for machine
tools. They reached th conclusion that the delay in
delivery dates had an adverse effect on foreign orders.
They considered the variations in delivery date as being a
symptom of changes in internal demand pressure. It throws
light on the fact that short-term supply of machine tool
industry is inelastic. Yet, the delay in delivery date
could also be the result of other factors such as the loss
8. D.J. Smith, "Stop-Go and United Kingdom's Exports of
manufactures", Bulletin of the Oxford University
Institute ofEconomics &Statistics, vol. 30 (1968),
pp. 25-36.
9. M.D. Steuer, R.J. Ball and J.R. Eaton, "The Effects ;f
Waiting Times on Foreign Orders for Machine Tools ,
Econonica, Vo1.33 (November, 1966), pp. 387-403.

of production caused by strikes or disruption of transport
services.
~eff" has shown that the major causes of export
stagnation in Brazil during the period 1948-76 were the
overvaluntion of the exchange rate for export, export
duties, export quotas and outright prohibitions of exports
in some cases. He adds that the discriminatory attitude
towards exports was due to the fact that the government
approached export possibilities with an implicit 'exportable
surplus' theory of trade. According to this approach, a
country exports what is 'left over' after the domestic
market has been adequately supplied. Domestic demand takes
priority and must be supplied even if internal prices are
lower than world prices, lor a given volume of production,
if more is diverted to exports, the internal prices will
increase which will reduce the real income of the working
people. The main reason, accordine to Leff, for following
the 'exportable surplus' trade theory is the government's
policy to prevent the rise in the prices of those goods
10. Nathaniel H.Leff, "Export Sr;agnation and Autarkic
Development in Brazil 1947-62 , guarterly Journal of
Economics, Vo1.81 (1967), pp.286-301.
See also N.H.Leff "The Exportable SUr lus ,ppproach to
Forelgn Trade in' Underdeveloped ~ountries , Economic
Development and Cultural Change, Vo1.17 (1968-69),
pp.346-355.

which weigh heavily in the consumption of labour class. The
policy of maintaining lower prices is pursued to avoid
political disturbances. This theory assumes the supply of
product as price-inelastic. This assumption is questionable
because output is likely to increase in response to the
higher internal prices.
A study by I.C. 0knokwol1 showed that movement in
the exchange rate is very important in determining the
industrial countries' demand for Nigeria's agricultural
exports because of its role in influencing the relative
prices in the economy. In this view, it is proper to
suggest that the policy of devaluation of the domestic
currency would have important implications for the
agricultural export sector as well as for the overall
balance of payments. Further, he opined that the
devaluation of Naira would restore the competitiveness of
the agricultural export sector in the sense that Nigerian
export products would then be cheaper relative to those of
competitors and substitutes. It would also reduce the
incentives on the part of the industrial countries to resort
to synthetic substitutes. He reached the conclusion that
11. I.C.Okonkow, "Erosion of Agricultural Exports in an Oil
Economy: The Case of Nigeria", Journal of Agricultural
Economics, Vo1.40 (September 1989), pp.375-384.

the recent devaluation of the Naira
helpad restore the
competitiveness of Nigerian cocoa, cotton, hides and skins
in the world market and it failed in case of rubber, palm
produce and timbers which has got the synthetic substitutes
in the industrial countries.
~.~.Iiwa'~ opined that an important cause of
instability in the balance of payments of the primary
producing countries has been instability in the
international prices of primary commodities. He added that
price instability can also cause inflation in the countries
that import primary commodities - many of which are
industrial countries. A study of "the 1981-82 Recession
and Non-oil Primary Commojity Prices" by Ke-Young Chu and
Thomas orrison' on'^ showed that non-oil primary commodity
prices underwent a significant change in the 1970s that both
nominal commodity prices and price instability increased
markedly.
They identified that economic activity, world
inflation, the dollar exchange rates vis-a-vis other major
currencies and supply shocks were the major variables
responsible for this changed price behaviour. Further, they
12. E.C.Hwa, "Price Determination in Several International
Primary Commodity Markets: A Structural Analysis", pg
Staff Papers, Vo1.26 (1979), pp.157-188.
13. Ke-Young Chu and Thomas K.Morrison, "The 1981-81
Recession and Non-oil Primary Commodity Prices",
Staff Papers, Vo1.31 (1984), pp.93-140.

found that the sharp decline in commodity prices during
1981-82 was due to a culmination of a trend toward more
unstable prices that began in the 1970s.
None of the above mentioned studies taken alone
provides a satisfactory explanation of the trade performance
of a country.
However, it is observed that on the supply side,
relative prices (ratio of export prices to internal prices),
domestic production, internal consumption and the domestic
export policies are the major determinants. Whereas, on the
demand side, the relative prices (ratio of the country's
prices to the competitors' prlces in the international
market), real income, the growth in, and the size of, the
population, the relative prices to the substitutes (ratio of
the commodity x's price to the prices of its substitutes),
exchange rates, commercial policies abroad and a number of
non-price factors such as designing, quality, marketing etc.
arbitrate a country's export performance. Further,
behaviour of the commodity prices in the international spot
markets influences a country's exports and the world trade
at large. And also, the level of, and change in, world
import demand determine a country's export volume.

OBJBCPIVBS OF TEE STUDY
Considering the above framework, the present study
has two broad objectives
(i) to analyse the select segments of the world market for
tea, coffee and cashew kernels to which India exports
these three commodities.
In detail, it is proposed (a) to study the nature and
extent of the trends, (b) to determine the factors
influencing on the consumption of tea, coffee and cashew
kernels, and (c) to identify the factors influencing on the
imports of tea, coffee and cashew kernels from India.
(ii) to study the price behaviour in the International spot
markets for tea, coffee and cashew kernels.
Specifically, it is proposed to test whether the
monthly prices of tea in the London Spot Market and monthly
prices of coffee and cashew kernels in the New York Spot
Market are generated by Random Walk Process or not.
The present study is limited to the twenty year
period of 1970 to 1989 and is based on the secondary data.
Information needed for the study was collected from

publications of International Tea Committee, Tea Board of
India, United Planters' Association of India, Coffee Board
of India, International Coffee Organisation, Cashew Export
Promotion Council of India, The Directorate of Cashew
Development and Food and Agricultural Organisation.
Besides, information relating to India's foreign trade was
compiled from Reserve Bank of India Bulletin, Monthly
Statistics of Foreign Trade of India, Report of Economic
Surveys, IMF Financial Statistics and World Bank
publications. The data on population, Gross Domestic
Product and Exchange Rates were collected exclusively from
IMF financial statistics.
For the purpose of analysing the data, the
statistical tools such as trend equation, simple and
mulitiple regression models and autocorrelation techniques
have been used in general.
(i) To find out growth rates, the following logarithmic
linear regrsssion equation has been estimated.
Derivation
The value (v) in any time period (t) is equal to
its value in the preceding period (v~-~) plus the change in
its value (DV) over the single time period.

Rewriting (i), DV = r ~ ~ ............... - ~
(ii)
It follows that
Vt = Vt-l + r"t-l
= (l+r)~~-~ ............... (iii)
Extending the argument aback one additional period yields
Vt-l = (l+r)Vt-2
Which, then substituted in (iii)
...............
(iv)
= (l+r)2~t-l ............... (v)
Extending back through time to some "original" or starting
value (Vo) yields the usual compound interest formula
Where 't' is the number of elapsed time periods
since the beginning value.
The equation for this
computation, obtained by solving (vi), for r, is
1-
ti v
r = / --!-- 1 ................ (Vli)
Vo
The practical problem with (vii), and the reason
to be suspicious of these computed rates of growth, is that
the computed values rely exclusively on the beginning value

and ending value. If these value are not representative of
the beginning and the end, the estimate of r will be biased
one. Therefore, to acquire more confidence in the estimates
of rate of growth, one should use all information available
to find a representative rate of growth based on some
measures of central tendency.
helpful.
Regression modeling will be
The basic formula (vi) provides a good place to
begin searching for a linear and additive form with which to
estimate 'r'. Specifically, taking the natural logarithm,
the logarithm to the base 'e' of both sides yields.
lnVt = lnVo + tln(l+r) ............... (viii)
Which may be written as
* *
Yt = Bo + B~*x~* ............... (ix)
Where
yt* = lnVt and
Xt
= t = number of time periods since beginning.
Note that (ix) is linear and additive in xt*, that
both yt* and xt* is a simple logarithmic
transformation, and xt* is the familiar variable
called time.
Finally
* *
...............
Bo = lnVo and B1 = ln(l+r) (x)

The rate of growth can always be computed by manipulating
the second part (v) or by solving (x) for 'r'
r = eB* - 1
All that is required is an estimate Bl*
To proceed simply attach a disturbance term to the
appropriate log linear mathematical form
* * *
lnYt = Bo + B1 Xt + Ut
(ii) To examine the factors influencing on the imports of
tea and coffee for consumption in various countries,
multiple linear regression equations with and without
log specifications have been estimated.
wherer
Xo =
+ plP + p2Y + pgPO + p4RP + E
I4xo = Import volume of commodity X (1970=100)
15p = Price of the commodity X in US dollar
(1970=100)
16y = Real Gross Domestic Product in US dollar.
(1970=100)
14. Since none of the countries under the study except
Japan (only in case of tea) produce tea and coffee
domestically, the consumption equals to net imports.
15. Prices prevailing in the London spot market for tea and
in the New York spot market for coffee.
16. The GDP is deflated with the appropriate GDP deflater
to adjust to the inflation in the economies and is
expressed in terms of US dollar to accommodate to the
changes in exchange rates.

l7P0 = Population (1970=100)
18Flp = Ratio of commodity x's price to the prices of
its close substitutes
E = error term
o(= constant
pl, pz, pS and p4 are the estimated coefficients.
(iii) To ascertain the factors influencing on the imports of
cashew for consumption in various countries, the
multiple linear regression equntions with and without
log specification have been estimated. The model is
Where
19xc = Import volume of cashew kernels (1970-100)
P = Cashew prices prevailing in New York spot
market in US dollars (1970=100)
Y = Real Gross Domestic Product in US dollar.
(1970=100)
17. Tea and Coffee drinking is habitual. Hence, the size
of, and the growth in, the population highly influence
a country's tea and coffee consumption.
18. Tea and Coffee are the well-known close substitutes to
each other.
19. Since none of the countries under the study produce
cashew kernels domestically, the countries cashew
consumption equals to the net imports.

20~ = Time-trend (1,2, ..... n)
E = error term
o( = constant
pl, pz, and p3 are the estimated co-efficients.
(iv)
to identify the factors influencing on the imports of
tea and cashew kernels from India into various
countries, multiple linear regression equations with
and without log specifications have been estimated.
Where
XDi = Imports of commodity X from India in terms
of volume (1970=100)
"pi = International price for commodity X from
India in US dollar (1970=100)
"pw
= World Price for commodity X in US dollar
(1970=100)
Y = Real Gross Domestic Product in US dollar
(1970-100)
20. Time trend is used to bring out the effects of
disruption of world cnshew market in the late 70s and
the consequences thereof and other factors.
21. It is the prices of Indian tea prevailing in the London
spot market. However, in case of cashew kernels,
lmport unit values of cashew kernels imported from
India into the respective countries have been taken due
to non-availability of Indian cashew price in the New
York spot market since 1970.
22. It is the aggregate tea prices prevailing in the London
spot market. In case of cashew kernels, it is the
aggregate import unit values of cashew kernels in the
respective countries.

E = error term
o(- constant
p1 and p2 are the estimated coefficients.
(v)
to study the behaviour of the prices of tea, coffee
and cashew kernels in the respective international
spot markets, autocorrelations have been estimated
within 24 lags. The equation is
Where rk = the estimated coefficient for a given lag.
Xt = Price changes
X = Arithmatic mean
T = the sample size
k = the lag number
SCOPE OP TEE STUDY
issues :
The present study is confined to the following
(i)
Although there are a number of items in the pool of
India's agricultural exports, the present study has

een narrowed down to tea, coffee and cashew kernels
on the basis of their contribution to the export
earnings of the country and also of the availability
of the well-knit, continuous data for the period.
(ii)
Though India exports these three commodities to a
large number of countries, the present study is
confined to some select segments of the world market
on the basis of their largeness and the availability
of data.
(iii) There are a number of auction centres for these three
commodities all over the world. Yet, the study of
the behaviour of thz prices has been centred only on
the biggest auction centres viz., London Spot Market
for tea, and New York Spot Market for coffee and
cashew kernels.
(iv)
The period of the study is restricted to twenty
years, from 1970 to 1989, in general. Because, this
period was epochal with respect to international
trade in tea, coffee and cashew kernels in general
and the India's export performance
in particular.

LIMITATIOllS OF TAB STUDY
The study suffers from the following limitations:
(i)
(ii)
The estimated demand equations do not consider the
non-price factors due to difficulties in quantifying
them.
Due to inaccessibility to, or non-availability of,
the concerned data, the study period in some cases
was to be shortened from the general period.
(iii) Because of the inaccessability to the data on imports
of Indian coffee into various countries, the import
demand functions for Indian coffee have not been
estimated.
(BAPTERISATION SCHEME
The thesis has been divided into seven chapters.
Chapter I -- Introduction -- presents the research
problem, review of literature, objectives of the study,
methodology, scope of the study and limitations of the
study.
Chapter I1 -- India's Foreign Trade - An Overview
-- deals with trends in and composition of, India's exports
and imports.

Chapter 111 -- The World Tea Market, Chapter IV --
The world Coffee Market and Chapter V -- The World Cashew
Market -- discuss the trends in, and pattern of, world trade
in tea, coffee and cashew kernels respectively with special
reference to India's trade. Further, they deliberate the
factors influencing on the imports and consumption of these
three commodities.
Chapter VI -- Price Behaviour -- examines the
pattern of the fluctuating movement of tea prices in London
Spot Market and of coffee and cashew kernels prices in New
York Spot Market.
In Chapter VII -- Summary and Policy Implications
-- gives a brief summary of the findings and the policy
implications thereof.

CXLWTER 2
INLIIAIS FOREIGN TRADE - AN OVERVIEW
This chapter presents an overall picture of
India's foreign trade in the 70s and in the 80s. And it can
be a prelude to the following three chapters which deal with
the nature and pattern of world market for tea, coffee and
cashew kernels.
INDIA'S EXPMLTS
Table 2.1 reveals India's exports over the period
1970-71 to 1989-90. It shows that export earnings increased
slowly from 1970-71 to 1972-73. After that, it increased
rapidly over the period, 1973-74 to 1984-85, followed by a
decline in the year 1985-86; and a rising trend is visible
during the rest of the period, 1986-87 to 1989-90. The
increasing trend can largely be explained in terms of rapid
increase in the export unit value and partly be explained in
terms of moderate growth experienced in the export volume.
As a matter of fact, between 1970-71 and 1978-79, the change
in the export value Index and export volume Index had been
to the extent of 71 point and of bare 41 point respectively.
Between 1978-79 to 1988-89, export value and export volume

indices increased by 108 point and 55 point
respectively. In absolute terms, average annual value
of export earnings increased from U.S. $2826 million in
the quinquennium of 1970-71 to 1974-75, to $6326
million in 1975-76 to 1979-80, to $9373 million in
1980-81 to 1984-85 and to $12291 million in 1985-86 to
1989-90. Of course, export earnings increased by an
annual compound rate of 17.59 per cent in the ten year
period of 1970-71 to 1979-80 and by 6.44 per cent
during 1980-81 to 1989-90. Over the entire period, it
experienced a growth at compound rate of 10.37 per
cent. This tremendous growth registered in the 70s
distinctly stands out with the moderate growth
registered in the 60s and 80s and with the stagnation
in the 50s. As a matter of fact, the average Bnnual
value of exports barely changed from $1268.7 million in
the five year period of 1951-55 to $1266.2 million in
1956-60,l
The average annual value of imports
increased from $1512 million in the quinquennium 1960-
1. Manmohan Singh, India's Exports Trends, Oxford,
1964, p.9.

61 to 1964-65, to $1765 million during the period of
1965-66 to 1970-71.
So much so of the trends in the India's
export earnings in aggregate. flow we can consider how
far these overall trends in India's export earnings
were reflected by individual commodities. Table 2.2
brings out the changes in the foreign exchange earnings
derived from India's principal 'exports.
Interebtingly, when most of the commodities
registered rapid growth in the 70s, they more or less
lost their momentum to grow in the 80s. In addition to
that, the trends during the period of the study
happened to be more complex and perplexed compared to
those of 50s and 60s. However, from the table 2.3, one
can find six distinct trends in the 70s as given below.
(1) Export earnings, in terms of US dollar, from
coffee, rice, tobacco, fruits and vegetables,
marine products, machinery and transport
2. Deepak Nayyar, India's Exports and Export Policies
in the 60s, Cambridge, 1976, p.18-

equipments, carpets and pearls, precious gems k
Jewellery grew tremendously by a compound rate of
27.2 per cent, 26.51 per cent, 24.86 per cent,
21.65 per cent, 25.04 per cent, 22.9 per cent,
27.72 per cent and 36.33 per cent respectively.
(2) Export earnings from Tea, Spices, Oil cakes, Iron
ore, Leather and Leather .manufacturers, Basic
chemicals Bnd Allied products and Foot wear grew
fastly by a compound rate of 12.96 per cent, 18.77
per cent, 10.08 per cent, 10.95 per cent, 17.81
per cent, 18.02 per cent and 11.97 per cent
respectively.
(3) Export earnings from cashew kernels, coir yarn and
manufacturers, petroleum products grew rapldly by
7.27 per cent, 9.91 per cent and 8.77 per cent
respectively.
(4) Export earnings from cotton yarn fabrics and made
ups increased moderately by 3.91 per cent.

(5) Export earnings from Jute manufacturers was more
or less stagnant as it decreased slowly by a
compound rate of 0.97 per cent.
(6) Export earnings from Raw cotton decreased steeply
by B
compound rate of 7.7 per cent.
In the same manner, eight distinct trends in
India's export earnings from individual commodities can
be identified for the 80s as given beLow.
(1) Export earnings from Raw cotton and Tobacco
decreased heavily by a compbund rate of 10.29 per
cent and 10.28 per cent respectively.
(2) Export earnings from Jute manufacturers decreased
steeply by 7.12 per cent.
(3) Export earnings from rice and coir yarn
manufacturers decreased moderately by
cent and 3.7 per cent respectively.
2.15 per

(4) Export earnings from tea and coffee, as having
registered a decline only at a compound rate of 0.28
per cent and 0.30 per cent respectively, and from meat
preparation, as having grown only by a compound rate of
0.22 per cent, were more or less stagnant.
(5) Export earnings from cashew Kernels, marine products
and Iron ore increased moderately by 3.51 per cent,
4.18 per cent and 3.06 per cent respectively.
(6) Spices, oil cakes, cotton yarn fabrics and made ups and
carpets registered a rapid growth at a compound rate of
6.20 per cent, 6.43 per cent, 6,40 per cent and 7.53
per cent respectively.
(7) Fruits 8 vegetables, Leather 8 Leather products, Basic
chemical 8 allied products, Machinery 8 Transport
equipments and Pearls, Precious gems 8 Jewellery
increased fastly by a compound rate of 14.57 per cent,
12.34 per cent, 18.98 per cent, 12.29 per cent and
16.25 per cent respectively.
(8) Petroleum products registered a tremendous growth at a
compound rate of 32.79 per cent.

(BMCES IN TEE COYYODITY COYPOSITION OF EXPORTS
Table 2.2 shows the percentage contribution of the
India's major export items in the total export earnings.
The striking fact here is that the importance of agriculture
allied products and of the traditional manufacturers has
been declining to the advantage of non-traditional
manufactured items. The share of tea and jute
manufacturers, the two important traditional items, declined
dramatically in the second half of the 70s and the same
trend continued during the 80s also. This change is not new
but the mere continuation of the 60s. The share of Jute
manufacturers in the India's total export earnings declined
from 22.7 per cent in 1965-66 to 14.6 per cent in 1969-70;
and the share of the tea fell from 19.1 per cent in 1960-61
to 8.6 per cent in 1969-70.~ The share of tobacco, cashew
kernels, oil cakes, spices, Iron ore, cotton yarn and
fabrics, Coir yarn 8 Manufacturers and Foot wear declined
steadily over the period; while the share of rice,
vegetables and fruits, Leather 8 Leather manufacturers,
Basic chemicals 8 allied products and petroleum products
rose steadily. Distinctly, the shares of Machinery &
Transport Equipments, Ready made garments and Pearls,
3. w., p.23, Table 2.3.

Precious stones 8 Jewellery increased steadily and rapidly.
And the share of sugar and sugar preparations fluctuated
widely and appear to have declined over the period.
The expressed objective of economic planning in
India has been that the external resources required to
finance development must increasingly be constituted by
export earnings. Table 2.4 compares the trends in India's
exports and imports and brings out the position of the
foreign exchange reserves. It is visible that except in the
years 1972-73 and 1976-77, imports always outstripped the
exports during the period of the study and the export-import
ratio fluctuated widely. Surprisingly, the average annual
Export Import Ratio dropped from a high level of 89.5 per
cent in the first half of 70s to 84.4 per cent in the second
half and to 60.54 per cent in the first half of the 80s.
After that, it tends to improve during the second half of
the 80s as it averaged around 67.6 per cent. Contrasted
this trend with that in 60s and that in the second half of
the 50s, one finds that the proportion of imports financed
by exports in the 70s and 80s, though has been declining,
has surprisingly been at a higher level as it had been
during the first five year plan period (1951-56). The
export-import ratio had dropped from a high level of 83.4
per cent in the first five year plan period to an average of

56.2 per cent in the second half of 50s4. We find that that
ratio of exports to imports fluctuated around 60 per cent
from 1960-61 to 1967-6~~.
On India's foreign exchange reserve, it is visible
that it grew slowly during the period, 1970-71 to 1974-75
and rapidly during 1974-75 to 1979-80. After that, it more
or less stagnated in the 80s. In absolute term, the average
value of foreign exchange reserve increased from US$1218.4
million in the quinquennium of 1970-71 to 1974-75, to $5542
million in 1976-76 to 1979-80 to US$5,542 million in 1980-81
to 1984-85 and US$5,616.2 million in 1985-86 to 1989-90.
IRDIA'S SBARE IN WORLD EXPORTS
World Trade increased at a phenomenal pace during
the period. The value of the world exports in the years of
1979 and in 1989 was about five and half times and nearly
ten and half times respectively of its value in the year
1970. This tremendous growth experienced in the 70s and 80s
does stand out in sharp contrast with the moderate growth in
4. Manmohan Singh, India's Exports Trends, Oxford, 1964,
p. 11.
5. Deepak Nayyar, India's Exports and Export Policies in
the 60s, Cambridge, 197-

the 60s. For example, value of world exports in 1970 was
nearly two and half times its value in 1960~. Table 2.5
shows India's share in the world exports for the period,
1970 to 1989. India's share in the world exports had been
declining from a level of 0.72 per cent in 1970 to 0.51 per
cent in 1974. After that it started improving and thus,
arrived at a level of 0.62 per cent in 1977; then the trend
reversed and the same continued until 1985 when it dropped
to 0.44 per cent. Since then, after having suddenly risen
to 0.55 per cent in 1982, it started declining, so much to
0.44 per cent in 1985. Then, it was rising steadily and
thus arrived at a level of 0.55 per cent in 1989.
Generalising, we can find that India's share in world
exports declined during the period. Precisely, India's
relative share in the world exports fell from an average of
0.62 per cent in the first half of 70s, to 0.56 per cent in
the second half, to 0.50 per cent In the first half of 80s
and to 0.49 per cent in the second half. This trend is
nothing new but a continuation of the past two decades.
India's share in the world exports declined from about 2 per
cent in 1950 to approximately to 1 per cent in 1960'.
6. m., p.21.
7. Manmohan Singh, India's Exports Trends, Oxford, 1964,
p. 11.

India's share in world exports declined continuously from
1.04 per cent in 1960 to 0.65 per cent in 1970~.
Undoubtedly, a large proportion of the expansion
in world exports in the 70s was attributable to increased
exports from the high income oil exporting countries.
Whereas, in the 806, the share of non-oil developing
countries in the ever expanding world trade experienced an
appreciable increase (table 2.6)
Now, we can consider the market for India's
exports. Table 2.7 outlines directional changes in the
exports and brings out changes In relatlve shares of
different export markets for the period, 1977-78 to 1988-89.
India's exports to U.S.A., Japan, European Common Market
(excluding U.K.) and East European countries increased quite
fastly, say, by compound rates of 10.65 per cent, 8.23 per
cent, 8.27 per cent and 8.06 per cent respectively in the
twelve year period of 1977-78 to 1988-89; and exports to
EFTA increased rapidly by 5.28 per cent; while exports to
U.K. and ESCAP (excluding Japan) increased moderately by
8. Deepak Nayyar, India's Exports and Export Policies in
the 606, Cambridge, 1976, p.22.

1.37 per cent and 3.58 per cent respectively over the same
period. Exports to ECFWA was more or less stagnant as it
registered a growth at a meagre compound rate of 0.03 per
cent. On the other hand, exports to LAC, CCAEM and OAU
decreased steadily by a compound rate of 8.01 per cent, 4.89
per cent and 2.01 per cent respectively.
In absolute terms, India's exports to U.S.A.
increased from an annual average of US $901.7 million in the
triennium of 1977-78 to 1979-80 to $2256.2 million in 1986-
87 to 1988-89. Over the same period, exports to U.K.
increased from $620.8 million to $716.4 million, to Japan
from $697 million to $1282.6 million, to ESCAP from $1066.5
million to $1552.7 million, to ECFWA from $688.9 million to
$700.0 million, to ECM (excluding U.K. ) from $1253 million
to $2798.1 million, to EFTA from $163.7 million to $278.9
million and to East European countries from $924.5 million
to $2099.5 million.
Accordingly,the rapid growth experienced in
India's exports to U.S.A., Japan, ECM and East European
countries is quite reflected by the changes in their
relative shares in India's total exports. The share of
U.S.A. increased from 12.87 per cent in the triennium of
1977-78 to 1979-80 to 19.27 per cent in 1986-87 to 1988-89.
Over the same period, the share of Japan increased from 9.92

per cent to 10.94 per cent, of ECM (excluding U.K.) from
17.76 per cent to 23.73 per cent, of East European Countries
from 13.3 per cent to 18.08 per cent and of EFTA from 2.3
per cent to 2.39 per cent. Surprisingly, though India's
exports to U.K. and ESCAP (excluding Japan) increased and to
ECFNA stagnated over the period, their relative shares
happened to decline. This fact speaks itself of a virtual
directional change in India's export trade. The share of
U.K. declined from a triennial average of 8.93 per cent in
1977-78 to 1979-80 to 6.11 per cent in 1986-87 to 1988-89.
Over the same period, the share of ESCAP declined from 15.15
per cent to 13.15 per cent and of ECFWA declined from 9.86
per cent to 5.99 per cent. Naturally, the relative share of
EAC, OCAEM and 0AU in the total export of India declined
respectively from 1.35 per cent, 0.77 per cent and 2.06 per
cent in the triennium of 1977-78 to 1979-80 to 0.57 per
cent, 0.39 per cent and 0.71 per cent in 1986-87 to 1988-89.
INDIA'S IYPORTS
Table 2.8 outlines the changes in India's imports
over the period, 1970-71 to 1989-90, It shows that, during
1970-71 to 1972-73, India's imports in terms of US dollar
increased slowly. After that, from 1973-74 onwards, it grew
rapidly but this trend continued only up to 1980-81. Then,

etween 1980-81 and 1986-87, it was more or less stagnant.
From 1987-88 onwards, it has gathered momentum to grow
rapidly. Specifically, India's imports in terms of US
dollar increased tremendously by a compound rate of 19.83
per. cent in the ten year period of 1970-71 to 1979-80 and
moderately by a compound rate of 2.98 per cent in 1980-81 to
1989-90. Over the entire period, 1970-71 to 1989-90, it
registered n growth at a compound rate of 12.72 per cent. In
absolute terms, it increased from an annual average of US
$3093.2 million in the quinquennium of 1970-71 to 1971-75,
to $7680.6 million in 1978-77 to 1979-80, to $15503.8
million in 1980-81 to 1984-85 and to $17986 million in 1985-
86 to 1989-90. This increasing trend can largely be
explained in terms of steep rise in the import unit value
and partly be explained in terms of moderate rise in the
volume of in~ports over the period. To subtantiate, when
import value index increased by 74 point between 1970-71 and
1978-79, the import volume index increased only by 32.8
point, just half of the former, over the same period. And
the trends in the 80s were no different except in tile year
1983-84 when import volume nearly kept pace with rising
import value.
aggregate.
So much so of the trends in the India's imports in
Now, we can explore how far these trends

eflected in the individual items of imports during the
period. Table 2.9 outlines trends in India's imports of
principal items and bring out their relative shares for the
period, 1970-71 to 1989-90. It is remarkable that imports
of all the major items excepting cereals 8 its preparations
grew rapidly in the 70s; while, turning to the 80s, one may
co~iiuse with complexities of trends in the composition of
India's imports (Table 2.10).
Petroleum and petroleum products registered a
moderate growth during 1970-71 to 1972-73. With the advent
of oil crisis in 1973, petroleum imports experienced a
quantum jump from US $268.7 million in 1972-73 to $723.7
million in 1973-74; then it continued to increase and then,
this arrived at $6689.7 million in 1980-81. After that,
with augmentation of domestic production of crude oil,
petroleum import bill decreased to $4036.6 million in 1085-
86 and then fell to $2229.1 million In 1986-87, it agnin
rose to $3058.7 million in 1989-90. Specifically, from
table 2.10, India's petroleum import bill increased by a
compound rate of 38.95 per cent in the ten ;ear period of
1970-71 to 1979-80, and decreased by a compound rate of 9.05
percent in 1980-81 to 1989-90; however, it registered a
growth at a compound rate of 15.42 per cent over the twenty
year period of 1970-71 to 1989-90. Of course, the relative

share of petroleum in the total import bill of India
increased from 8.32 per cent in the year 1970-71 to 27.85
per cent in 1976-77, and continued to increase, so much to
41.91 per cent in 1980-81. After that, it started
declining, so much to 13.99 per cent in 1986-87; again it
increased to 17.77 per cent in 1989-90. Petroleum imports
in the 70s, being the single largest item, had so much
influence on the ctinnges in India's total import bill.
Imports of cereals & its preparations decreased
steeply but unsteadily during the period. With a bumper
crop of food grains in the year 1970-71, India could
maintain her import bill on cereals B its preparation as low
as an annual average of $277.3 million during 1970-71 to
1972-73. But, due to sluggishness of the domestic output of
food grains during 1972-73 and 1973-74, the food graln
imports registered an increase from 1973-74 onwnrds.
However, this trend continued only up to 1976-77; over this
period, it averaged around $1171.3 million. After that,
having experienced a sharp decline durlng 1977-78 to 1979-
80, it again shot up in the year 1980-81 and maintained the
same level up to 1983-84, over the former period, it
averaged around $125.4 million and the latter period, around
$824.3 million. It was due to Government's undertakilig to
import wheat in large scale to build up buffer stock to

combat pressure on prices in the 2arly 80s. Then, the food
grain imports started declining, so much to $50.9 million in
1987-88 but to rise again to $453.4 million in 1988-89.
Generalising, India's imports of cereals B its preparations,
though with wide fluctuations, decreased by a compound rate
of 9.01 per cent in the ten year period of 1970-71 to 1979-
80, and by 14.05 per cent in 1980-81 to 1989-90. Of course,
the relative share of food grain imports declined from an
average of 15.74 per cent in the seven year period of 1970-
71 to 1976-77, to 2.55 per cent in 1978-79 to 1983-84 and
further to 1.65 per cent in the six year period of 1984-85
to 1989-90.
Imports of fertilisers increased unsteadily during
the period. Specifically, it grew by a compound rate of
19.9 per cent in the ten year period of 1970-71 to 1979-80
and by 0.18 per cent in 1980-81 to 1989-90. Of course, it
appears to have stagnated in the 80s. However, the share of
fertiliser in the total import bill registered decline, so
much from an annual average of 7.17 per cent in the
quinquennium of 1970-71 to 1974-75, to 6.61 per cent in
1975-76 to 1979-80, to 4.5 per cent in 1980-81 to 1984-85
and to 4.49 per cent in 1985-86 to 1989-90.
Imports of vegetable oils 8 fats registered a
tremendous growth so much of a compound rate of 52.39 per

cent in the ten year period of 1970-71 to 1979-80; but, the
trend happened to reverse in the 80s and thus, it declined
by a compound rate of 10.55 per cent. In absolute terms, it
increased from an annual average of $25.1 million in the
quinquennium of 1970-71 to 1974-75, to $426.6 million in
1975-76 to 1979-80 and to $714.6 million in 1980-81 to 1984-
85. After that, it declined to $500.3 million in 1985-86 to
1989-90. Such a trend experienced in the imports of
vegetable oils and fats can be explained in terms of the
need of the economy to import more quantity of edible oils
during the period, 1977-78 to 1981-82 and during 1983-84 to
1984-85 due to failure of the domestic production to keep
pace with domestic demand and thus to maintain domestic
price stability. Corresponding with this trend, the
relative share of edible oils and fats in India's imports
rose from an average of 0.87 per cent in the quinquennium of
1970-71 to 1974-75, to 5.38 per cent in 1975-76 to 1979-80.
However, after that, it fell to 4.6 per cent in 1980-81 to
1984-85 and to 3.98 per cent in 1985-86 to 1989-90.
Imports of Iron and Steel registered a growth at a
compound rate of 4.39 per cent in the ten year period of
1970-71 to 1979-80, and by 1.09 per cent in 1980-81 to 1989-
90; of course, over the entire period, 1970-71 to 1989-90,
it grew by a compound rate of 10.76 per cent per annum. In

absolute terms, imports of iron and steel increased from an
annual average of US $330.4 million in the quinquennium of
1970-71 to 1974-75 to $342.6 million in 1975-76 to 1979-80,
to $1116.0 million in 1980-81 to 1984-85 and to $1223.3
million in 1985-86 to 1989-90. However, the relative share
of Iron and Steel in India's imports was falling so much
from an average of 10.38 per cent in the quinquennium of
1970-71 to 1974-75, to 4.56 per cent in 1975-76 to 1979-80,
with a slight improvement over the previous period, to 7.18
per cent in 1980-81 to 1984-85 and to 6.83 per cent in 1985-
86 to 1989-90.
Imports of non-ferrous metals increased unsteadily
by a compound rate of 12.70 per cent in the ten year period
of 1970-71 to 1979-80 and by 3.08 per cent in 1980-81 to
1989-90. Of course, it registered a growth at a compound
rate of 8.43 per cent during the twenty year period of 1970-
71 to 1989-90. This slow pace of growth experienced in the
imports of non-ferrous metals in the 80s was attributed to
good performance of and growth in, the domestic Aluminum,
Copper and Zinc industries in terms of capacity utilisation
and expansion from 1982-83 onwards. Of course, the share of
non-ferrous metals in India's total import bill declined
from an annual average of 5.46 per cent in the quinquennium
of 1970-71 to 1974-75, to 3.53 per cent in 1975-76 to 1979-

per cent in 1980-81 to 1989-90. In absolute terms, it
increased from an annual average of US $56.7 million in the
quinquennium of 1970-71 to 1974-75, to $335.5 million in
1975-76 to 1979-80, to $751.1 million in 1980-81 to 1984-85
and to $1676.5 million in 1985-86 to 1989-90. Corresponding
with this trend, over the same periods, its relative share
in india's total import bill rose from an average of 1.77
per cent to 4.27 per cent, 4.86 per cent and 9.06 per cent.
Of course, the growth in imports of this item was in
response to the increase in export demand for Indian
Jewellery.
Imports of Organic and Inorganic Chemicals,
Artificial Resins 8 Plastic Materials, Medicinal and
Pharmaceutical products and Medical Materials & products
registered rapid growth at a compound rate of 15.89 per
cent, 31.02 per cent, 14.09 per cent and 11.65 per cent
respectively in the 70s and at a compound rate of 12.86 per
cent, 19.31 per cent, 8.37 per cent, and 4.04 per cent
respectively in the 80s. However, imports of synthetic and
regenerated fibre increased tremendously by a compound rate
of 57.46 per cent in the ten year period of 1970-71 to 1979-
80; while it registered a decline at a compound rate of
18.09 per cent in the 80s.

INDIA'S TEBYS OF TBbSg
Terms of tradeg has much influence on the balance
of payment and National Income position of many developed
countries. For a developing country like India, Terms of
Trade have a distinct qualitative significance and important
welfare implications, so far as they partake of the nature
of economic indicators of the resultant forces operating
these economies. Table 2.11 outlines India's Export Unit
Value Index, Import Unit Value Index and Terms of Trade for
the period of 1970-71 to 1985-86. India's Terms of Trade
show a lamentable performance during the period. After
having a notable improvement during 1970-71 to 1972-73, the
country's terms of trade dramatically deteriorated during
the year 1973-74; this deteriorating trend continued till
there was an improvement in the year 1977-78. Again, it
continued to decline till it experienced further remarkable
improvement in the year 1983-84. Over the rest of the
period, it experienced a decline hut not to the level of
deterioration. Ceneralising this trend, the Terms of Trade
9. This term is used for the relationship between the
price of exports and imports. It may be expressed as
an index:
Price Index of Exports
Index of Terms of Trade = ......................
Price Index of Imports

had be,en deteriorating by a compound rate of 0.95 per cent
during the sixteen year period of 1970-71 to 1985-86. This
deterioration over the period can be explained in terms of
quicker pace of growth registered by the Import Unit Value,
say, at a compound rate of 11.21 per cent than what the
Export Unit Value experienced, say, only at 9.33 per cent.
INDIA'S EXPORT-GDP RATIO AND IWRT-GDP RATIO
Fluctuations in exports and imports may generate
magnified variations in National ~ncome.~O Table 2.12
outlines India's Export-GDP ratio and Import-GDP ratio for
the period, 1970-71 to 1989-90.
Export-GDP ratio and
Import-GDP ratio increased by a compound rate of 6.78 per
cent and 8.76 per cent respectively in the ten year period
of 1970-71 to 1979-80. During 1980-81 to 1989-90, when
Export-GDP ratio decreased by a compound rate of 3.5 per
10. This principle is known as Foreign Trade Multiplier
which is based on the idea that a change in exports
relative to imports has some multiplier effect on
National Income as a change in autonomous expenditure
does. Similarly, a change in imports relative to
exports has the same multiplier effect on National
Income as a change in withdrawals from Income stream
does. Thus, in general, an increase in exports tend to
rise in domestic income and an increase in imports tend
to fall in domestic income. But, the increased income
through exports also induces some imports which act as
"leakages" tending to reduce the full multiplier effect
that would exist, if imports remained constant.

cent, the Import-GDP ratio increased by 4.95 per cent.
However, over the period, 1970-71 to 1989-90, Export-GDP
Ratio had been more or less sluggish as it experienced a
growth only at a compound rate 0.62 per cent; while the
Import-GDP ratio registered a growth at a compound rate of
2.79 per cent. In absolute terms, Export-GDP ratio averaged
around 5.62 per cent in the 70s, and, with a slight decline
from the previous decade, around 5.56 per cent in the 80s.
At the same time, Import-GDP ratio, having averaged around
6.59 per cent in the 70s, rose to 8.82 per cent in the 80s.
The higher values of Impsrt-G.D.P ratio over the Export-
G.D.P ratio should have adversely affected the economy
through the Import-Biased Foreign Trade Multiplier during
the period.
INDIA'S WRBIGN TRADE IN 1990-91
The country's total export earnings stood at US
$18143 million and the import expenses at $24073 million,
leaving a trade deficit to the tune of $5930 million in the
year 1990-91. The exports earnings and the import expenses
increased by 9.1 per cent and 13.2 per cent respectively
over the previous year (1989-90). Around 18.5 per cent of
the country's export earnings was from Agriculture & allied
products and 71.6 per cent from manufactures. Like wise, 45

per cent of the import expenses was incurred on bulk
imports, 25 per cent on petroleum and 24.2 per cent on
capital goods. During the year, the country's Terms of
Trade was a favourable one since Export Unit Value Index
(293) was higher than Import Unit Value Index (268); the net
Terms of Trade was 109.
To conclude, India's exports both in terms of
volume and value increased during the period; the rate of
growth pronounced in the value was higher than that in the
volume. Except in the fiscal years 1972-73 and 1976-77,
imports always exceeded exports. Foreign Exchange Reserve
registered an unsteady growth. The importance of
agriculture in the total export earnings of the country
declined but to the advantage of manufactured export items.
India's exports lagged behind the world exports. There were
directional changes in the country's exports. India's
imports both in terms of volume and value increased during
the period; however, the rate of growth pronounced in the
value is higher than that in the volume. Petroleum and
petroleum products together constituted the biggest major
item in the country's total import bill. The imports of
agricultural items were erratic as were made in response to
the timely need of the economy; while imports of capital

goods registered a steady, fast growth. India's terms of
trade deteriorated during the period. Import-G.D.P ratios,
being higher than Export-G.D.P ratio, appears to have
brought out an adverse multiplier effect on the country's
economy.

Table 2.1: India's Exports - 1970-71 to 1989-90
Year
Exports in
US$ Million
Export vaule
Index
1978-79~100
Export Volume
Index
1978-791100
1970-71
1971-72
1972-73
1973-74
1974-75
1975-76
1976-77
1977-78
1978-79
1979-80
1980-81
1981-82
1982-83
1983-84
1984-85
1985-86
1986-87
1987-88
1988-89
1989-90
2029
2137
2595
3259
4109
4819
5739
6184
6989
7899
8529
9015
9311
9675
10335
8808
9874
12092
14537
16142
29.0
30.6
37.1
46.6
58.8
69.0
82.1
88.5
100.0
113.0
122.0
129.0
133.2
138.4
147.9
126.0
141.3
173.0
208.0
231.0
59.0
59.2
66.5
69.5
73.7
81.7
96.8
93.2
100.0
106.2
108.1
110.1
116.7
113.0
120.8
111.3
121 .O
140.0
155.0
-
Source: Statistics Published by the Director General of
Commercial Intelligence and Statistics (DGCIBS)
Culcutta.
Note : (a) Statistics relate to Indian fiscal years
beginning 1st April
(b) The figures of export earnings have been
converted into US dollar with appropriate
exchange rates
(c) Value index has been computed from the data on
value of exports.

*la 2.2b: I I d In V* Y h Or Indla'l Prhlpal Erp~rb - 1980-81 to lPBePD
(In U.5.
3 m11110
:.,ltit"teP
~lttni rav
1 .19bsu kernair
hi:89
:11 cekw
~eaetablss end fruits
1 118.1 209.6 143.2 149.1 158.1 l82.l 259 239.9 1 199.0 1 214.6
(2,l) (2.1) (1.51 Il.51 (1.5) (2.0) (2.6) (2.01 (1.11 (1.1)
I
111.6 114.1 1000 115.5 181.9 224.6 221.2 241.5 180.4 1 144.0
( 1.71 ( 1.3) ll.1) ( 1.21 I 1.8) [ 2.61 ( 2.2) 12.0) ( 1.0) (0,91
159.0 116.1 157.2 150.1 120.5 1081 150.8 lY.4 1 265.9 1 310.4
( 1.9) ( 1.5) ( 1.7) ( 1.61 ( 1.2) ( 1.2) ( 1.5) ( 1.2) ( 1,4)1 ( 2.0)
61.3
( 0.7)
74.2
( 0.8)
115.4
( 1.2)
94.1
( 1,O)
112.7
( 1.1)
166.5
( 1.91
184.0
( 1.9)
172.0
( 1.41
'21lne prod~cta
210.7
[ 3*2)
321.4
( 3.6)
385.0
( 4.1)
335.5
( I*)
148.5
( IAI
139.6
( 1.8)
426.6
( 4.1)
411.2
( 1.9)
451.8 400.6,
( 2,4] ( 2-51
iugar and ~upar
PrEGaiations
lalufscturarr

':..went%
J-1 made ups
.:. rnanvtsctursr$
I
:.e!9
208.4 198.6 178.7 192.1 227.9 188.4 244.4 294.1 371.7 341.7
( 2.4) ( 2.2) ( 1.9) ( 2.0) ( 2.2) ( 2.1) ( 2.1) ( 2.4) ( 1.0) ( 2.1)/
:~~~l3,PtlCiCulg~ma 785.9 937.2 1073.3 1281.3 1088.7 1214.9 1644.8 2015.9 3160.9 3088.4
dd 18~nliery (9.2) (10,4) (11.5) (13.2) (10.5) (11.8) (16.7) (16.6) (16.7) (19,I)l
B 0 1.5 27.7 100.9 353.5 224.4 112.3 325.9 500.1 162.9 1 506.5
( 0.4) ( 0.3)l ( lS9)[ (3.1) ( 2.2) (4.1) ( 3.3) ( 4.1) ( 1.91 ( 2.5)
I
3.hr .n brscketa Ira psrcsntrgs to tho total
-:@ Reserve BSF* or Indl., Repc~t on Curroncy and finmca, varloua 188u.a.

Table 2.3: India's Principal Exports - Annual Compound
Gmth Bates
Classification
1. Tea and mate
2. Coffee and Coffee
substitute
3. Rice
4. Cotton raw
5. Tobacco (Raw and
manufactured)
6. Cashew kernels
7. Spices
8. Oil cakes
9. Fruits and vegetables
10. Marine products
11. Meat & meat preparations
12. Iron ore
13. Leather and leather
manufacturers
14. Basic chemicals & Allied
products
15. Foot wear
16. Machinery and transport
equipments
17. Ready made garments
18. Cottom yarn fabrics and
made ups
19. Jute manufacturers
20. Coir yarn 8 manufacturers
21. Carpets
22. Pearls, precious gems and
jewllery
23. Petroleum products
24. Total including others
Source: Computed from Table 2.2
1970171
to
1979180
12.96
27.20
26.51
-7.71
24.86
7.27
18.77
10.08
21.65
25.04
-
10.96
17.81
18.02
11.97
22.90
-
3.91
-0.97
9.91
27.72
36.33
8.77
17.58
Period
1980181
to
1989/90
---
-0.28
-0.30
-2.15
-10.29
-10.28
3.51
6.20
6.43
14.57
4.18
0.22
3.06
12.34
18.98
12.29
17.23
6.40
-7.12
-3.70
7.53
16.25
32.77
7.65
1970171
to
1989/90
5.47
10.32
24.39
5.56
2.22
5.63
7.93
3.89
20.16
12.14
-
7.22
10.95
16.07
-
14.15
6.95
-2.97
1.43
17.28
22.27
25.31
10.75
---

Table 2.4: India's Poreign Trade and Exchange Reserves - 1970-71 to
1989-W)
Import Export -
RS.crores Import ratio
in per cent
1634 93.9
Foreign Exchange
Reserves
1
in
Rs.crores U.S$ millior
732.35 975
Source: RBI Bulletin, Various Issues
RBI Report on Currency and Finance, Various Issues.

Table 2.5: World Trade and India's Exports
Year
India's
Total
Exports
in US $
illi ion
Total World
Exports
in US $ Million
Percentage
of India's
Exports to
World
Exports
1970
2026
280304
0.72
1971
2061
312726
0.66
1972
2406
374700
0.64
1973
2959
519600
0.57
1971
3926
773300
0.51
1975
4355
796500
0.55
1976
5549
906800
0.61
1977
6356
1029900
0.62
1978
6671
1260900
0.53
1979
7806
1531500
0.51
1980
8242
1857600
0.44
1981
8265
1844000
0.45
1982
9358
1716400
0.55
1983
9148
1682700
0.54
1984
9445
1783700
0.53
1985
7915
1808100
0.44
1986
9399
1989000
0.47
1987
11298
2350200
0.48
1988
1989
13325
1 15846
2683500
2891100
0.50
1 0.55
Source: International Financial Statistics, 1990,
International Monetary Fund

Table 2.6: World Exports by Country Groups - 1970 to 1989
(in percentages)
Year
Industrial
Countries
Oil Exporting
Countries
Non-Oil
Developing
Countries
World
1970
76.5
6.1
17.4
100.0
1971
75.9
7.1
17.0
100.0
1972
75.7
7.1
17.2
100.0
1973
74.5
7.5
18.0
100.0
1974
66.8
16.3
16.9
100.0
1 1917
1978
67.8
70.2
15.0
12.6
17.2
17.2
100.0
100.0
1975
69.1
14.6
16.3
100.0
1976
67.7
15.6
16.8
100.0
1979
67.6
15.1
17.3
100.0
1980
66.0
16.0
18.1
100.0
1981
66.0
15.0
19.0
100.0
1982
67.9
12.3
19.8
100.0
1983
68.4
10.7
20.9
100.0
1984
69.0
9.3
21.7
100.0
1985
70.4
8.5
21.1
100.0
1986
74.6
5.6
19.7
100.0
1987
1988
1989 .
73.9
74.0
73.6
5.4
20.8 100.0
21.2
100.0
21.5 1 100.0
Source: Computed from International Financial Statistics, 1990.

70
Table 2.8: India's I.ports - 1970-71 to 1989-00
Year
Imports in
US$ Million
Imports Value
Index
1978-79 =lo0
Import Volume
Index
1978-79=100
1970-71
1971-72
1972-73
1973-74
1974-75
1975-76
1976-77
1977-78
1978-79
1979-80
1980-81
1981-82
1982-83
1983-84
1984-85
1985-86
1986-87
1987-88
1988-89
1989-90
2160
2452
2459
3817
5578
6286
5663
6889
8313
11252
15949
15715
15118
15676
15061
15893
15935
17161
20288
20653
26.0
29.5
29.6
45.9
67.1
75.6
68.1
82.9
100.0
135.4
191.9
189.0
181.9
188.6
181.2
191.2
191.7
206.4
244.1
248.4
67.2
80.6
76.7
87.2
77.2
76.0
76.1
100.0
100.0
116.4
137.9
150.6
154.6
185.4
156.1
181.2
-
-
-
Source: Statistics Published by the Director General of
Commercial Intelligence and Statistics (DGCICS),
Calcutta.
Note : (a) Statistics relate to Indian fiscal years
beginning 1st April
(b)
The figures of Import payments have been
converted into US dollar with appropriate
exchange rates.
(c) Value Index has been computed from the data on
value of exports.

2.9.: 1- In th Y d u o( India's Pr1mlP.l lqmb - 197C-11 to lW9-W
(in U.5.
i mllllon)
/
, .re:tililsrs
I
il.:apital
gmda
!ns:rumsntr h photogrschic
and optical gooda
I
,La':e~ in bracketa e n psrcantnge to the tots1
'OU"e: Raasrv~ Bank of India, Rqort m Currency and Finance, varioua iaauss

2,gb: ~rsnda In th Y l l u of Indla't Prlnelpll Ilport* - 1980-81 to 1989-90
(in U.5.
S nilllon)
t,:...8873
.;,ta,:a oils 6 fata 867.9 / 722.1 419.6 726.9 536.4 1 605.7 503.0 747.6 1 522.4 123.0
SC~:.SJ ( 5.44) ( 4.57) /( 2.78) ( 4.64) I( 5.55) I( 3.811 3.16) /( 4.36) I( 2.58) ( 0.60) 1
-s and atesl
.-'s:rous
netsls
., l:sc~ous end mi- 529.7 458.9 771.2 1087.2 908.3 889.3 1181.0 1556.9 2281.4 2473~7
s:~:ds $!ones ( 3.321 ( 2.91) ( 5.10) ( 6.981 ( 6.021 (5.601 ( 1.41) ( 9.07) )(11.26) (11.98)
" .' "'aketr are perc~ntag~ to tho total
'glerre Bar* of India, Report on Currency and Finance, uari~ur isausa

73
Table 2.10: India's Imports - Annual -pound
Growth Rates
Classification
1. Petroleum, Petroleum products
and related materials
2. Cereals and its preparations
3. Fertilizers
1. Vegetable oils& fats (edible)
5. Paper, Paper boards and
manufacture thereof
6. Iron and Steel
7. Non-ferrous metals
8. Capital goods
9. Pearls, Precious and semiprecious
stones
10. Organic and inorganic
chemicals
11. Artificial resins & plastic
materials etc.
12. Medicinal and pharmaceutical
products
13. Chemical materials and
products
14. Synthetic and regenerated
fibre
15. Total including others
Source: Computed from Table 2.9
1970-71
to
1979-80
38.95
-9.01
19.90
52.39
18.31
4.39
12.70
13.57
39.60
15.89
31.02
14.09
11.65
57.48
19.83
1980-81
to
1989-90
1970-71
to
1989-90
---
-9.03
-14.05
0.18
-10.55
-0.92
1.09
3.08
10.33
19.10
12.68
19.31
8.37
4.04
-18.06
2.98
I l l -
15.42
-6.16
8.82
20.88
10.73
10.76
8.43
13.28
25.27
15.40
24.62
10.13
2.86
12.85
12.72

Table 2.11: India's Term8 of Trade - 1970-71 to 1985-86
Year
Export Unit
Value Index
Import Unit
Value Index
Terms of
Trade
1970-71
45.0
35.3
127.4
1971-72
46.0
32.8
140.2
1972-73
51.2
34.2
149.7
1973-74
62.2
48.9
127.2
1974-75
78.0
84.8
92.3
1975-76
83.9
99.1
84.7
1976-77
89.4
96.3
92.9
1977-78
100.3
88.0
114.0
1978-79
100.0
100.0
100.0
1979-80
105.4
144.1
92.4
1980-81
108.5
134.2
80.8
1981-82
1982-83
1983-84
124.1
132.0
151.0
133.1
136.3
125.8
93.2
96.8
120.0
I
1984-85
169.8
161.7
105.0
1985-86
170.8
159.8
106.9
Source: India's Data Base: The Economy Volume I1

table 2.12: Percenbge Share of India's Exports and Imports
in Gross Dolpestic Product - 1970-71 to 1989-90
Year
Exp/GDP
(1)
Imp/GDP
(2)
Trade Deficit-GDP
Ratio
1970-71
4.21
4.48
-0.27
1971-72
4.12
4.68
-0.56
1972-73
4.58
4.34
0.24
1973-74
4.71
5.52
-0.81
1974-75
5.28
7.16
-1.88
1975-76
6.10
7.95
-1.85
1976-77
7.19
7.10
0.09
1977-78
6.70
7.46
-0.76
1978-79
6.56
7.81
-1.25
1979-80
6.75
9.43
-2.68
1980-81
5.87
10.95
-5.08
1981-82
5.94
10.63
-4.69
1983-83
6.35
10.37
-4.02
1983-84
1984-85
1985-86
1986-87
1987-88
1988-89
1989-90
5.73
9.20
-3.47
6.10
9.02
::: 1
8.45
7.76
4.71 4.69
6.25
"" I ::::
-2.92
-3.77
-2.95
-1.98
-2.03
-1.75
Source: Compiled from Reports of Economic Surveys, Ministry
of Finance, Govt, of India, various issues

CMER 3
THE WORLD TEA YABgET
This chapter presents a brief history of India's
export trade in tea, discusses the trends in, and the
pattern of, the world trade in tea with special reference to
India's trade and brings out the factors influencing on the
consumption of tea in, and the importation of Indian tea
into, the select export markets.
HISTORICAL P!BSPECTIVE
China is the ancient home of tea where tea
drinking prevailed some five thousand years back. This
habit spread to Japan by 800 AD and reached Europe through
Dutch trade in 1610 AD. Within few years, it reached
England, but remained scarce and expensive until the East
India Company resorted to trading with China in large
quantities in 1669. Tea drinking became a habit among the
rich and poor alike in England by the dawn of the 17th
century.
In 1823, Major Robert Bruce discovered tea plants
growing wild in upper Assam, but much credit goes to his
adventurous brother, A.C.Bruce for establishing the first

experimental plantations at Gabroo hills in Assam. The
first shipment of eight chest of Indian tea reached London
in 1839 and was auctioned at fancy prices.
World War I was a period of exceptional
prosperity for tea and the industry emerged with increased
financial strength and optimism. Post War years were one of
expansion in area and production which led to short-lived
but serious depression in industry in 1920. By 1922, prices
improved and the industries prospects brightened.
In 1930, prices again dropped steeply and the
disaster that had overtaken some companies led to cooperative
action and voluntary control of crop in 1933. An
export quota scheme was also introduced in the same year.
Simultaneously, efforts were undertaken by tea producing
countries to improve demand for tea. The international tea
committee was also set up in 1935 to coordinate the
voluntary control of production and expand world tea
consumption.
With the outbreak of world war I1 in 1939, London
auctions were suspended. Through the bulk purchase scheme,
the ministry of food in U.K. took over all exportable
Surplus of tea. Producers were given a price based on the
average export sales of the preceding three years with

provision for allowance for increases in the cost of
production. During 1940s, Indian tea enjoyed a good external
demand and increasing internal demand.
Resumption of London auctions in 1951 marked a
return to normal peace-time marketing conditions. Global
production in excess of demand and delay in receiving normal
trade channels led to an unfortunate slump in the industry
in 1952. However, market conditions soon improved and the
year 1954 turned out to be a boom year for the industry.
The short spell of prosperity disappeared soon and the
industry was faced with an unprecedented depression for
nearly two decades since 1955.
Global tea production sans China increased from a
triennial average of 1445 million kgs in 1970-72 to 1542.3
million kgs in 1979-81 and further to 1887 million kgs in
1987-89. Over the period, it increased by a compound rate
of 3.04 per cent. Bifurcating the entire period, it
experienced a rapid growth at a compound rate of 3.8 per
cent and 2.85 per cent in the 70s and 80s respectively.
India accounted for 30.2 per cent of the world tea
production in the triennium of 1970-72, 36.2 per cent both

in 1979-81 and 1987-89; Sri Lanka, 14.8 per cent in 1970-
72, 13.1 per cent in 1979-81 and 11.5 per cent in 1987-89;
Indonesia, 3.3 per cent in 1970-72, 6.4 per cent in 1979-81
and 7.1 per cent in 1987-89; Japan, 6.4 per cent in 1970-72,
6.5 per cent in 1979-81 and 4.9 per cent in 1987-89; Kenya,
3 per cent in 1970-71, 6.1 per cent in 1979-81 and 8.8 per
cent in 1987-89; Malawi, 1.3 per cent in 1970-72, 2 per cent
both in 1979-81 and 1987-89; Taiwan, 1.3 per cent in 1970-
72, 1.7 per cent in 1979-81 and 1.3 per cent in 1987-89 and
Bangladesh, 1.6 per cent in 1970-72, 2.5 per cent in 1979-81
and 2.2 per cent in 1987-89. It is observed that India is
the largest tea producer in the world, followed by Sri Lanka
and Kenya (table 3.1).
India, augmented domestic tea production from a
triennial average of 436.7 million kgs in 1970-72 to 557.7
million kgs in 1979-81 and further to 683.1 million kgs in
1987-89. Overall, it experienced a growth at a compound
rate of 2.53 per cent in the twenty year period of 1970-89
(table 3.1). Such a rapid growth experienced during the
period can equally be attributed to tie expansion of land
area under tea cultivation and an increase in the
productivity. Let the triennium of 1969-70 be 100.0, index
of land area under tea cultivation rose from 101.8 point in
1970-71 to 115.0 point in 1987-88. Over the same period,

index of yield per hectare increased from 104.5 point to
137.9 point (Tea Board of India, Calcutta).
Global tea exports increased from a triennial
average of 677.7 million kgs in 1970-72 to 852.2 million kgs
in 1979-81 and further to 1044 million kgs in 1987-89. Over
the period, it increased by 2.46 per cent. Bifurcating the
entire period, it experienced a steady growth at a compound
rate of 2.82 per cent and 3.06 per cent in the 70s and 80s
respectively. The share of India in the world tea exports
declined from 30.2 per cent in the triennium of 1970-72 to
25.9 per cent in 1979-81 and further to 20.5 per cent in
1987-89; of Bangladesh, improved from 2.6 per cent in 1972-
74 to 3.6 per cent in 1979-81; then it fell to 2.3 per cent
in 1987-89; of Sri Lanka, steeply declined from 29.5 per
cent in 1970-72 to 21.7 per cent in 1979-81 and then
slightly to 19.8 per cent in 1987-89; of Indonesia, steadily
rose from 5.7 per cent in 1970-72 to 7.8 per cent in 1979-81
and again to 9.4 per cent in 1987-89; of China, mounted up
from 7 per cent in 1970-72 to 12 per cent in 1979-81 and
again to 18.3 per cent in 1987-89; of Kenya, soared from 5.8
per cent in 1970-72 to 9.5 per cent in 1979-81 and further
to 13.8 per cent in 1987-89; and of Malawi, increased from

2.7 per cent in 1970-72 to 3.6 per cent in 1979-81; then it
slightly declined to 3.5 per cent in 1987-89. It appears
that India still enjoys number one position in the world tea
trade, closely followed by Sri Lanka. China, Kenya and
Indonesia emerged as the potential exporters of tea, but
only at the cost of the former two, during the period (table
3.2).
The following trends have been identified in the
tea exports of the individual countries:-
India's tea exports augmented from a triennial
average of 204.8 million Kgs in 1970-72 to 221.6 million kgs
in 1979-81; then it declined to 204.8 million kgs in 1987-
89. Of course, it shows a torpid growth at a compound rate
of 0.05 per cent over the period. Sri Lankan5 tea exports
fell from 199.7 million kgs in 1970-72 to 184.9 million kgs
in 1979-81; then it rose to 208.1 million kgs in 1987-89.
It shows sluggish growth at a compound rate of 0.04 per
cent. Tea exports from Indonesia sky-rocketed from 38.5
million kgs in 1970-72 to 66.4 million kgs in 1979-81 and
again to 99.3 million kgs in 1987-89, showing an overall
growth at a compound rate of 5.84 per cent. Exports from
China fairly doubled from 47.4 million kgs in 1970-72 to
102.3 million kgs in 1979-81 and quadrupled to 192.4 million
kgs in 1987-89. As a matter of course, it experienced the

fastest growth at a compound rate of 8.7 per cent. Kenya's
tea exports soared from 39.2 million kg6 in 1970-72 to 79.8
million kg6 in 1979-81 and further to 145.4 million kgs in
1987-89. Exactly, it grew by a compound rate of 7.62 per
cent over the period. Malawi's tea exports mounted up from
18.6 million kg6 in 1970-72 to 31.1 million kgs in 1978-81
and again to 36.8 million kgs in 1987-89. It grew by a
compound rate of 7.29 per cent over the period. It is
observed that tea exports from all major exporting countries
registered growths but at varying rates during the period
(Table 3.2).
lORLD TEA PRICE - 1970-1989
Annual average tea price in the London Spot market
fell from 45.67 pence per kg in the year 1970 to 42.24 pence
in 1972; then it started increasing steadily and thus
arrived at 84.13 pence in 1976. Interestingly, it suddenly
escalated to 156.33 pence in 1977. Such an unprecedented
shoot up in the price is attrlbuted to shortage of tea in
1976 arising out of production not keeping pace with
increased demand for tea consequent upon a shortage in the
supply of coffee and consequent high coffee prices and the
devaluation of pound sterling. After that, tea price
continued to decline steeply but only upto 1980 when

it plummeted to 92.16 pence. It is attributed to destocking
operation of tea resorted to by the importing countries to
fight inflation in their economies. Again, the price zoomed
to 262.85 pence in 1984 under the influence of the
multifarious economic factors such as the strong demand
pressure from the domestic markets of producing countries,
demand for over-stocking of tea by some of the traditional
tea importing countries, low stock levels in producing and
consuming countries and improvement in tea consumption in
middle east countries. Finally, price started dropping down
and averaged around 115.97 pence in the late 80s (Table
3.3).
The following regression equations of (i) World
tea exports (Xi) is a function of tea prices in the London
Spot Market (Yi) and (ii) tea prices in London Spot Market
(Yi) is a function of world tea production (Pi) have been
estimated for a twenty year period of 1970-1989.
(i) Tea prices on Tea Production
(ii) Tea Exports on Tea Prices

The equation (i) and (ii) show moderate goodness
of fit as are explained only to the extent of 47.58 per
cent and 37.04 per cent respectively in terms of R'. The
estimated B coefficient in both the equations are
statistically significant at 1 per cent confidence level and
carry a positive sign as theoretically expected. Here, the
equation (i) repudiates the general notion that there is a
negative correlation between world tea prices and tea
production; i.e, an increase in the tea production
ultimately leads to a fall in tea prices. This positive
relationship between tea prices and tea production, which is
contrary to the general notion, may be actuated largely by
the increased tea imports into the developing countries and
partly by pressure of the internal demand in the tea
exporting countries during the period.
MRU) TEA IYPOBTS - 1970 TO 1989
Market distributions of the world tea imports
portrays the persistence of market diversion from
traditional tea drinking areas of U.K. and Ireland and North
America and West Indies to developing countries of Asia and
erstwhile U.S.S.R. Moreover, world tea imports increased
from a triennial average of 651 million kgs in 1970-72 to
808.5 million kgs in 1979-81 and further to 1010.7 million

kgs in 1987-89. U.K. and Ireland together accounted for
31.4 per cent of the world tea imports in the triennium of
1970-72, then it fell to 21.9 per cent in 1979-81 and to
16.5 per cent in 1987-89. North America and West Indies
together accounted for 14.1 per cent in 1970-72; then it
dwindled to 12.8 per cent in 1979-81 and further to 9.9 per
cent in 1987-89. While the share of Asia in the world tea
imports rose from 14.6 per cent in 1970-72 to 26.3 per cent
in 1979-81 and further to 26.1 per cent in 1987-89. Like
wise the share of erstwhile U.S.S.R. mounted up from 7.1 per
cent in 1970-72 to 11.6 per cent in 1979-81 and again to
19.8 per cent in 1987-89. The shares of rest of West
Europe, East Europe, Latin America, Africa, Oceania and of
the tea producing-importing countries were more or less
unchanged throughout the period. The eleven tea importing
countries, viz., U.K., U.S.A., Canada, France, Germany,
Ireland, Japan, Australia, The Netherland, New Zealand and
Saudi Arabia, which together accounted for 59.8 per cent of
the world tea imports in the triennium of 1970-72, 45.2 per
cent in 1979-81, and 36.4 per cent in 1987-89 have been
chosen for the present study (table 3.4). Further, around
50 per cent of Indial6 tea exports were directed to these
markets in the triennium of 1970-71 to 1972-73, 33.9 per
cent in 1978-79 to 1980-81 and 21.4 per cent in 1987-88 to
1989-90 (table 3.5).

U.K., the largest export market for tea, accounted
for 32.2 per cent of global net tea imports in the triennium
of 1970-72, 20.4 per cent in 1979-81, and 15.4 per cent in
1987-89. The total tea imports into the country declined
from a triennial average of 230.3 million Kgs in 1970-72 to
189.7 million Kgs in 1979-81 and again to 187.1 million Kgs
in 1987-89. Over the period, it declined by a compound rate
of 1.86 per cent. Around 11.5 per cent and 15.3 per cent
of the tea imported into the country were re-exported in the
70s and 80s respectively. India's share in the U.K. tea
market dwindled from 32.4 per cent in the triennium of 1970-
72 to 30.3 per cent in 1979-81 and again to 15.7 per cent in
1987-89. Sri Lanka's share rather halved from 22.0 per cent
in 1970-72 to 10.8 per cent in 1979-81 and nearly quartered
to 6.4 per cent in 1987-89. Indonesia's share slightly
dropped from 2.9 per cent in 1970-72 to 2.7 per cent in
1979-81; then it rose to 3.4 per cent in 1987-89. Chinese
share tripled from 1.1 per cent in 1970-72 to 3.4 per cent
in 1979-81 and fairly quadrupled to 4.9 per cent in 1987-89.
Argentina's share rose from 2.1 per cent in 1970-72 to 2.9
per cent in 1979-81 and further to 4.1 per cent in 1987-89.
Kenyan share nearly doubled from 12.8 per cent in 1970-72 to

23.5 per cent in 1979-81 and fairly tripled to 42.3 per cent
in 1987-89. Mozambique's share fell from 5.1 per cent in
1970-72 to 3.7 per cent in 1979-81 and again to 3.2 per cent
in 1987-89. And Tanzania's share nearly doubled from 2.8
per cent in 1970-72 to 5.2 per cent in 1979-81 ; then it
fell to 1.9 per cent in 1987-89. Overall, it is observed
that Indian tea which had got the largest share in the
British tea market in the early 70s, has been lowered to
the second place in the late 80s. Consequently, Kenyan tea
became preponderant in the British Market in the late 80s
(table 3.6).
COWSUYPPION PATTERN
Tea consumption in the U.K. experienced a downward
trend during the period. The net tea imports into the
country declined from a triennial average of 209.7 million
Kgs in 1970-72 to 165 million Kgs in 1979-81 and further to
156.1 million Kgs in 1987-89. Over the period, it
decreased by a compound rate 1.67 per cent. Bifurcating the
entire period, it registered a rapid decline at a compound
rate of 2.57 per cent in the 70s against a slow decline at a
compound rate of 0.63 per cent in the 80s (table 3.18). The
estimated regression equation of the U.K1s demand for
imports of tea for consumption shows a moderate goodness of

fit as is explained only to the extent of 37.81 per cent in
terms of R~ (table 3.20). Yet, co-efficient with respect to
population only is statistically significant at 1 per cent
level but carries a negative sign contrary to the
theoretical expectations; the value is 7.5753. Provided
that the country's population grew slowly by a meagre
compound rate of 0.14 per cent, the main reason for having
the country's tea consumption declined during the period
appears to lie in the shift in the existing consumers'
preferences or habits rather than changes in prices or
income or in the prices of its well-known substitute,
coffee. As a matter of fact, per capita tea consumption in
the country fell from a triennial average of 3.79 kgs in
1970-72 to 3.2 kgs in 1979-81 and further to 2.81 kgs in
1987-89 (table 3.24).
According to U.K. Tea Council, the inconvenience
in preparing tea in relation to instant coffee appears to be
the important reason for the shift in the consumers
preference. Catering difficulties with tea (such as the
problem of underboiling or overboiling of water, tea making
being more time consuming, more messy, etc.) have shifted
the people towards drinking more coffee. Tea from vending
machines is less tasteful than home-made tea and this has
also been responsible for consumers switching over from tea

to coffee. The Natural Drinking Surveys conducted by the
U.K. Tea Council over various periods noted accordingly that
the share of coffee in the total hot beverages consumed in
the country continue to increase as much from 21 per cent in
the half year period of October - March of 1970-71 to 30.3
in the same period of 1982-83; while tea consumed in the
country fell from 72 per cent to 64 per cent during the
same perlod. Moreover, the country's coffee imports
increased by a compound rate of 0.92 per cent during the
period (table 3.7a). Further, the survey observed that as
far as the inconvenience in preparing tea is concerned, tea
bags have gone some way to match the extra convenience of
instant coffee. As a result of that, the tea bags in the
total tea market volume increased from 9 per cent in march
1970 to 40 per cent in march 1975 (table 3.7b).
IYPOATS OF INDIAN TEA
U.K.'s imports of Indian tea steadily declined
from a triennial average of 74.8 million Kgs in 1970-72 to
51.6 million Kgs in 1979-81 and further to 29.4 million in
1987-89. Over the period, it registered a decline at a
compound rate of 5.36 per cent. Bifurcating the entire
period, it decreased by a compound rate of 4.96 per cent in
the 70s, and by 7.55 per cent in the 80s (table 3.19). The

estimated linear regression equation with log specification
of the country's demand for imports of Indian tea shows
goodness of fit as is explained to the extent of 68.46 per
cent in terms of R' (3.23). The elasticity with respect
to relative price only is statistically significant at 1
per cent level which carries a negative sign as
theoretically expected; the value is 4.8564. It implies
that Indian tea is highly vulnerable to the competition in
the U.K. market so much so that a change in the Indian tea
price with respect to world aggregate price leads to more
than four times change in the volume of imports. tlence, the
main reason for having the country's imports of Indian tea
declined during the period appears to lie in the lack of
competitiveness of Indian tea in terms of price.
UNITED STATES
U.S.A., the second largest export market for tea,
accounted for 10.8 per cent of the world net tea imports in
the triennium of 1970-72, 10.2 per cent in 1979-81 and 8.3
per cent in 1987-89. The US total tea imports increased from
a triennium average of 70.2 million kgs in 1970-72 to 83.1
million Kgs in 1979-81 and again to 85.9 million kgs in
1987-89. On an average, 0.22 per cent and 0.18 per cent of

the country's total tea imports were re-exported in the 70s
and 80s respectively. The share of India in the US tea
imports nearly halved from 11.9 per cent in the triennium of
1970-72 to 6 per cent in 1979-81; further more it dropped
to 3.8 per cent in 1087-89. Sri Lanka's share fairly halved
from 31.1 per cent in 1970-72 to 16.1 per cent in 1979-81;
afresh, it dropped to 6.4 per cent in 1987-89. Indonesia's
share slightly improved from 14.8 per cent in 1970-72 to
15.9 per cent in 1979-81; then it declined to 14.3 per cent
in 1987-89. Chinese share sky-rocketed from 0.6 per cent in
1970-72 to 8.7 per cent in 1979-81 and again to 23 per cent
in 1987-89. Taiwan's share slightly improved from 3.7 per
cent in 1970-72 to 3.8 per cent 1979-81; then it fell to 1.1
per cent in 1987-89. In the same manner, Japanese share
rose from 3 per cent in 1970-72 to 3.2 per cent in 1979-81;
later, it dropped to 1.2 per cent in 1987-89. Kenya's share
declined from 11 per cent in 1970-72 to 8.8 per cent in
1979-81 and further to 6.3 per cent in 1987-89. Argentina's
share mounted up from 2.5 per cent in 1970-72 to 10.9 per
cent in 1979-81 and further to 18.3 per cent in 1987-89.
Brazilian share rose from 1.8 per cent in 1970-72 to 4.0 per
cent in 1979-81 and again to 5.6 per cent in 1987-89. It is
observed that Indian tea, which had got the third largest
share in the US market in the early 70s has been lowered to
the seventh place in the late 80s (table 3.8).

Tea consumption in U.S.A. shows an even upward
trend during the period. U.S. net tea imports rose from a
triennial average of 70.1 million kgs in 1970-72 to 82.9
million kg6 in 1979-81 and again to 82.9 million kgs in
1987-89, showing an overall increase at a compound rate of
0.99 per cent. Bifurcating the entire period, it
experienced a moderate growth at a compound rate of 1.67 per
cent in the 70s against slow growth at a compound rate of
0,32 per cent in the 80s (table 3.18).
Unfortunately, the estimated linear regression
equations both with log and without log specifications of
U.S. tea imports for consumption do not show any sign of
goodness of fit. In addition to that, none of the variables
considered here are statistically significant (table 3.20
and 3.21). Yet, l~orticulture and Tropical product division
of U.S. Department of Agriculture, throws light on the fact
that about 80 per cent U.S. tea consumption is as iced tea
and efforts to expand usage have been difficult as sales of
soft drinks, fruit juices and alcoholic beverages are in
direct competition with tea in cold beverage market. In
consequence, the per capita tea consumption in the country
which stood at a triennial average of 0.36 kg. both in 1970-

72 and 1979-81, slightly fell to 0.35 kg. in 1986-88 (table
3.24).
ImK)uTs OP INDIAN TEA
U.S.A's imports of Indian Tea declined from a
triennial average of 8.9 million kgs in 1970-72 to 4.9
million kgs in 1979-81 and further to 2.8 million kgs in
1987-89, showing a steady decline at a compound rate of 6.13
per cent. Bifurcating the entire period, it decreased
steeply by a compound rate of 7.16 per cent and 2.05 per
cent in the 70s and 80s respectively (table 3.19). The
estimated regression equation with log specification of U.S.
demand for imports of Indian tea shows moderate goodness of
fit as is explained only to the extent of 47.07 per cent in
terms of 8' (table 3.23). The elasticity with respect to
Gross Domestic Product only is statistically significant at
10 per cent level which carries a negative sign but contrary
to the theoretical expectation; the value is 1.9944. It
implies that Indian tea is competitive in the US market in
terms of price.
Nevertheless, the main reason for having the US
imports of Indian tea declined during the period appears to
lie in the US preference for importing tea from nearby
Latin American countries.

CANADA
Canada accounted for 3.1 per cent of the world net
tea imports in the triennium of 1970-72, 2.4 per cent in
1979-81 and 1.4 per cent in 1987-89. The total tea imports
of the country declined from a triennial average of 22.7
million kgs in 1970-72 to 21.9 million kgs in 1979-81 and
again to 15.7 million kgs in 1987-89. On an average, 11.1
per cent and 11.3 per cent of the tea imported into the
country were re-exported in the 70s and 80s respectively.
India's share in the Canadian tea market dropped from 15.5
per cent in the triennium of 1970-72 to 9.3 per cent in
1979-81 and further to 5.1 per cent in 1987-89. Sri Lanka's
share fell from 28.7 per cent in 1970-72 to 23.1 per cent in
1979-81 and again to 21.5 per cent in 1987-89. Indonesia's
share mounted up from 2.2 per cent in 1970-72 to 8.1 per
cent in 1979-81, then it slightly declined to 7.9 per cent
in 1987-89. Chinese share rose from 2.5 per cent in 1970-72
to 3.6 per cent in 1979-81 and further to 5.1 per cent in
1987-89. Kenyan share moved up from 9.7 per cent in 1970-72
to 16 per cent in 1979-81; then it came down to 10.3 per
cent in 1987-89. It is observed that Indian tea which had
got the second large share in the Canadian market in the

early 70s, has been lowered to the fourth place in the late
80s (table 3.9).
Tea consumption in Canada shows a downward trend
during the period. Canadian tea imports for consumption
fell slightly from a triennial average of 20.3 million kgs
in 1970-72 to 19.4 million kgs in 1979-81 and then
considerably to 14.2 million kgs in 1987-89. Over the
period, it decreased by a compound rate of 2.05 per cent.
Bifurcating the entire period, it was more or less stagnant
in the 70s as it tended to decline by a meagre compound rate
of 0.01 per cent; but it decreased steeply by a compound
rate of 3.88 per cent in the 80s (table 3.18). The
estimated regression equation of Canadian demand for imports
of tea for consumption shows goodness of fit as is explained
to the extent of 82.29 per cent in terms of (table 3.20).
The co-efficient with respect to Gross Domestic Product is
statistically significant at 5 per cent level but carries a
negative sign contrary to the theoretical expectations; the
value is 0.3011. And the co-efficient with respect to
relative tea-coffee prices is statistically significant at 5
per cent level and carries a negative sign as theoretically
expected. The value is 0.2097. Other variables considered

here are not significant. It implies that the main reasons
for the decline in the country's tea consumption during the
period appear to lie in (i) the reduction in the consumers'
spending on tea even at an increased real per capita income,
signifying that the market is already saturated and (ii) the
consumers inclination to drink tea or coffee interchangeably
in accordance with the cheapness put in relation to each
other. Accordingly, per capita tea consumption in the
country fell from a triennial average of 0.94 kg. in 1970-72
to 0.81 kg. in 1979-81 and again to 0.6 kg. in 1986-88
(table 3.24).
IYPORTS OF INDIAN TEA
In consequence, Canadian imports of Indian tea
declined from a triennial average of 3.5 million kgs in
1970-72 to 2 million kgs in 1979-81 and again to 0.8 million
kgs in 1987-89, showing a steep decline at a compound rate
of 7.84 per cent. Bifurcating the entire period, it
decreased steeply by a compound rate of 8.21 per cent and
10.4 per cent in the 70s and 80s respectively (table 3.19).
The estimated regression equation with log Specification
shows goodness of fit as is explained to the extent of 76.04
per cent in terms of FI2 (table 3.24). The elasticity with
respect to relative price is statistically significant at 1

per cent level and carries a negative sign as theoretically
expected; the value is 3.8653. And the elasticity with
respect to Gross Domestic Product is statistically
significant at 5 per cent level but carries a negative sign
contrary to the theoretical expectation; the value is 0.834.
It implies that: (i) Indian tea is incompetitive in terms of
price and (ii) the country preferred to import more tea from
Indonesia, China and Kenya. These two factors ultimately
actuated a declining trend in the country's imports of
Indian tea during the period.
Ireland accounted for 1.8 per cent of the world
net tea imports in the triennium of 1970-72, 1.5 per cent in
1979-81 and 1 per cent in 1987-89. The country's total tea
imports rose from a triennial average of 12.1 million kgs
in 1970-72 to 14.2 million kgs in 1979-81; then it fell to
11.9 million Kgs in 1987-89. On an average, 7.5 per cent
and 11.6 per cent of the tea imported into the country were
re-exported in the 70s and 80s respectively. India's share
in the total tea import of the country slightly improved
from 43 per cent in the triennium of 1970-72 to 44.5 per
cent in 1979-81; then it fairly halved to 21.3 per cent in

1987-89. Indonesia's share rose from 1.9 per cent in 1970-
72 to 3.7 per cent in 1979-81; then it nearly tripled to 9.1
per cent in 1987-89. China's share fell from 1.8 per cent
in 1970-72 to 1.1 per cent in 1979-81 and further to 0.4 per
cent in 1987-89. And Kenya's share nearly tripled from 10.7
per cent in 1970-72 to 28.2 per cent in 1979-81; then it
soared to 38.7 per cent in 1987-89. It is observed that
Indian tea had got the largest share in the Irelands' market
in the early 70s, has been lowered to the second place in
the late 80s. Consequently, Kenyan tea became preponderant
in the Ireland's market in the late 80s (table 3.10).
CONSUYPTION PATTERN
Tea consumption in the Ireland shows an even
downward trend during the period. The country's net tea
imports slightly rose from a triennial average of 12 million
kgs in 1970-72 to 12.1 million kgs in 1979-81; it fell to
10.6 million Kgs in 1987-89. Over the period, it declined
by a compound rate of 0.64 per cent. Bifurcating the entire
period, it experienced a slow growth at a compound rate of
0.57 per cent in the 70s against a moderate decline at a
compound rate of 1.17 per cent in the 80s (table 3.18).
The estimated regression equation with log
specification of Ireland's demand for imports of tea for

consumption for the period, 1970-88 shows a poor goodness of
fit as is explained only to the extent of 14.79 per cent in
terms of (table 3.21). The elasticity with respect to
price is statistically significant at 5 per cent level but
carries a positive sign contrary to theoretical
expectations; the value is 0.3753. And the elasticity with
respect to population is statistically significant at 10 per
cent level but carries a negative sign contrary to the
theoretical expectations; the value is 1.3734. Other
variables considered here are not significant. It implies
that, though tea seems to be an essential beverage to a
segment of the population of the country, the main reason
for having the country's tea consumption declined by a
compound rate of 10.65 per cent during the period appears to
lie in the shift in the consumers preferences or habits. It
is thus implied on the mere fact that the country's
population registered a growth at a moderate compound rate
of 1.1 per cent during the same period. Accordingly, per
capita tea consumption in the country fell from a triennial
average of 4.01 kgs in 1970-72 to 3.56 kgs in 1979-81 and
further to 3.07 kgs in 1986-88 (table 3.24).
IYPOBTS OP INDIAN TEIL
Ireland's imports of Indian tea, after having
slightly improved from a triennial average of 5.2 million

kgs in 1970-72 to 6.3 million kgs in 1979-81, fell to 2.5
million kgs in 1987-89. Over the period, it decreased by a
compound rate of 4.59 per cent. Bifurcating the entire
period, it experienced a slow growth at a compound rate of
0.99 per cent in the 70s against a steep decline at a
compound rate of 11.49 per cent in the 80s (table 3.19).
The estimated regression equation with log specification of
Ireland's demand for imports of Indian tea shows a moderate
goodness of fit as is explained only to the extent of 45.68
per cent in terms of 8' (table 3.23). The elasticity with
respect to relative price is statistically significant at 1
per cent level and carries a negative sign as theoretically
expected; the value, is 3.0143. And also, the elasticity
with respect to Gross Domestic Product is statistically
significant at 5 per cent level end carries a positive sign
as theoretically expected. The value is 0.92. It indicates
that Indian tea in the Ireland's market is vulnerable to
competition in terms of price. Further, it is observed that
a growth in the Gross Domestic Product of the country can
actuate only a slight improvement in the country's impor&of
Indian tea due to the meagreness of the income elasticity.
Hence, it can implied that the main reason for having the
country's imports of Indiantea declined during the peri6d
appears to lie in the lack of competitiveness of Indian tea
in terms of price.

The Netherlands accounted for 3.8 per cent of the
world net tea imports in the triennium of 1970-72, 3.4 per
cent in 1979-81 and 2.9 per cent in 1987-89. The country's
total tea imports gradually decreased from a triennial
average of 33.2 million kgs in 1970-72 to 22.6 million kgs
in 1979-81 and further to 21.3 million kgs in 1987-89. On
an average, 31.5 per cent and 42.6 per cent of the tea
imported into the country were re-exported in the 70s and
80s respectively. The share of India in the total tea
imports of the country fell from 5.8 per cent in the
triennium of 1970-72 to 33 per cent in 1979-81 and further
to 2.3 per cent in 1987-89. Sri Lanka's stiare slightly
improved from 8.7 per cent in 1970-72 to 9.4 per cent in
1979-81; then it dwindled to 8.4 per cent in 1987-89.
Indonesia's share went on shrinking from 23.4 per cent in
1970-72 to 17.6 per cent in 1979-81 and 16.8 per cent in
1987-89. The share of East Africa improved considerably
from 8.6 per cent in 1970-72 to 13.1 per cent in 1979-81 and
then slightly to 13.3 percent. It is noticed that Indian
tea which had got the fourth largest share in the
Netherlands' tea market in the early 70s has been lowered to
the fifth place in the late 80s (table 3.11).

Tea consumption in the Netherlands' shows a
promising upward trend during the period. The country's tea
imports for consumption increased from a triennial average
of 8.3 million Kgs in 1970-72 to 9.2 million Kgs in 1979-81
and further to 9.6 million Kgs in 1987-89. Over the
period, it grew by a compound rate 1.28 per cent.
Bifurcating the entire period, it experienced a moderate
growth at a compound rate of 1.09 per cent in the 70s and
1.84 per cent in the 80s (table 3.18). The estimated
regression equation with log specification of the country's
demand for importsqtea for consumption shows goodness of fit
as is explained to the extent of 68.09 per cent in terms of
(table 3.21). The elasticity with respect to population
only is statistically significant at 1 per cent level and
carries a positive sign as theoretically expected, the
value is 1.0127. It implies that the main reason for having
the country's tea consumption augmented during the period
appears to lie in the spread of tea drinking habit in the
country. It indicates that the country's tea market is yet
to be saturated. Accordingly, the per capita tea
consumption in the country slightly improved from a
triennial average of 0.63 Kg. in 1970-72 to 0.65 Kg. in
1979-81; it maintained the same level in the rest of the
period (table 3.24).

IlRslS OF INDIAN TEA
The Netherlands' imports of Indian tea decreased
steeply from a triennial average of 1.8 million Kgs in
1970-72 to 0.7 million Kgs in 1979-81 and again to 0.3
million Kg6 in 1987-89. Over the period, it slopped down by
a compound rate of 10.08 per cent. Bifurcating the entire
period, it declined rapidly by a compound rate of 8.91 per
cent in the 70s and appallingly by 32.9 per cent in the 80s
(table 3.19). The estimated regression equation with log
specifhation of the Netherlands' demand for imports of
Indian tea shows goodness of fit as is explained to the
extent of 59.21 per cent in terms of R' (table 3.23). The
elasticity with respect to relative prices is statistically
significant at 5 per cent level and carries a negative sign
as theoretically expected; the value is 5.1731. And the
elasticity with respect to Gross Domestic Product is
statistically significant at 5 per cent level but carries a
negative slgn contrary to the theoretical expectations, the
value is 1.1542. It implies that the main reasons for such
a dismal decrease in the country's import6 of Indian tea
during the period appears to lie in (i) the lack of
competitiveness of Indian tea in terms of price and (ii) the
country's preference to import, and spend more on, tea
produced in East Africa and China.

Germany accounted for 1.4 per cent of the global
net tea imports in the triennium of 1970-72, 1.8 per cent in
1979-81 and 1.4 per cent in 1987-89. The country's total
tea imports went on increasing from a triennial average of
9.7 million kgs in 1970-72 to 16.2 million kgs in 1979-81
and to 19 milllon kg8 in 1987-89. On an average, 3.8 per
cent and 16.9 per cent of the total tea imported into the
country were re-exported in the 0s and 80s respectively.
India's share in the German tea market dwindled from 44.9
per cent in the triennium of 1970-72 to 35.7 per cent in
1979-81 and again to 29 per cent in 1987-89. Sri Lanka's
share dropped from 29.2 per cent in 1970-72 to 23.3 per cent
in 1979-81 and further to 18.2 per cent in 1987-89.
Indonesia's shnre Pel1 from 12.1 per cent in 1970-72 to 7.2
per cent in 1979-81; then it slightly improved to 9.2 per
cent in 1987-89. Chinese share soared from 1.8 per cent in
1970-72 to 12.8 per cent in 1979-81; then it slightly
dropped to 10.9 per cent in 1987-89. And Kenya's share
modestly improved from 2.5 per cent in 1970-72 to 2.8 per
cent in 1979-81; then it declined to 2.1 per cent in 1987-
89. It is note-worthy that Indian tea enjoyed the lion's

share in the German market throughout the period (table
3.12).
Tea consumption in Germany shows upward trend
during the period. The country's net tea imports soared
from a triennial average of 9 million kgs in 1970-72 to 14.2
million kgs in 1979-81; then it slightly declined to 13.5
million kgs in 1987-89. Over the period, it grew by a
compound rate 4.86 per cent. Bifurcating the entire period,
it experienced tremendous growth at a compound rate of 12.26
per cent in the 70s against n smooth decline at a compound
rate of 0.56 per cent in the 80s (table 3.18). The
estimated regression equation with log specification of the
country's demand for imports of tea for consumption shows
goodness of fit as is explained to the extent of 71.3 per
cent in terms of ff2 (table 3.21). The elasticity with
respect to price is statistically significant at 5 per cent
but carries a positive sign contrary to the theoretical
expectation; the value is 0.3502. And the elasticity with
respect to Gross Domestic Product is statistically
significant at 5 per cent level and carries a positive sign
as theoretically expected; the value is 0.2688. Other
variables considered liere are not significant. It implies

that tea appears to be an indispensable beverage in the
country. Seeing the sluggishness in the country's tea
consumption in the 80s after a tremendous growth in it in
the 70s and also of the meagreness of both the
statistically significant elasticities stated above, it
indicates that the demand for tea drinking in the country
tended to be perfectly inelastic in recent years. In
consequence, per capita tea consumption in the country
slightly increased from a triennial average of 0.15 kg in
1970-72 to 0.24 kg in 1979-81 and the same in 1986-88 too
(table 3.24).
IYWBTS OF INDIAN TEA
Germany's imports of Indian tea rose from a
triennial average of 4.3 kgs in 1970-72 to 5.8 million kgs
in 1979-81; then it slightly declined to 5.5 million kgs in
1987-89. Over the period, it grew by a compound rate of 1.58
per cent. Bifurcating the entire period, it experienced a
rapid growth at a compound rate of 2.65 per cent in the 70s
against a moderate decline at.a compound rate of 0.79 per
cent in the 80s (table 3.19). The linear regression
equation with log specification of German demand for imports
of lndia tea shows moderate goodness of fit as explained
only to the extent of 45.73 per cent in terms of ff2
(table

3.23). The elasticity with respect to Gross Domestic
Product only is statistically significant at 5 per cent
level which carries a positive sign as theoretically
expected, the value is 0.217. It implies that one of the
reasons for having the country's imports of Indian tea
increased during the period appears to lie in the country's
preference for Indian tea.
FRANCE
UAiUm PROFILE
France accounted for 0.55 per cent of the global
net tea imports in the triennium of 1970-72, 0.99 per cent
in 1979-81 and 0.97 per cent in 1987-89. The country's
total tea imports augmented from a triennial average of 3.7
million kgs in 1970-72 to 8.4 million kgs in 1979-81 and
further to 10.6 million kgs in 1987-89. On an average, 1.5
per cent and 5.8 per cent of the tea imported into the
country were re-exported in the 70s and 80s respectively.
The India's share in the Fiench tea market fell from 16.2
per cent in the triennium of 1970-72 to 11.4 per cent in
1979-81 and again to 6.7 per cent in 1987-89. Sri Lanka's
share dropped from 51.5 per cent in 1970-72 to 34.1 per
cent in 1979-81 and further to 30.3 per cent in 1987-89.
Chinese share fairly doubled from 20.3 per cent in 1970-72

to 42.3 per cent in 1979-81; then it slightly declined to
42.1 per cent in 1987-89. And Indonesia's share rose from
0.5 per cent in 1970-72 to 1.2 per cent in 1979-81 and
further to 4.1 per cent in 1987-89. It is observed ttiat
Indian tea enjoyed the third largest Share in the French
market through out the period (table 3.13).
CONSUMPTION PA'lTLIBW
Tea consumption in France shows a steep upward
trend. The country's tea imports for consumption sky-
rocketed from a triennial average of 3.6 million kgs in
1970-73 to 8 mlllion kg8 in 1979-81; further it improved to
9.8 million kgs. in 1987-89. Over the period, it
experienced a rapid growth at a compound rate of 5.96 per
cent. Bifurcating the entire period, it registered
marvellous growth at a compound rate of 12.26 per cent in
the 70s against normal growth at a compound rate of 2.74 per
cent in the 80s (table 3.18).
The estimated regression
equation of the French demand for imports of tea for
consumption for the period shows goodness of fit as
explained to the extent of 86.87 per cent in terms of 6"
(table 3.20).
The co-efficient with respect to Cross
Domestic Product and the relative tea-coffee prices only are
statistically significant at one per cent level which carry

a positive and negative sign respectively as theoretically
expected; the value of the former is 1.6671 and the latter
1.3324. It implies that consumers in the country alternate
between tea and coffee in response to changes in the
relative prices. Notwithstanding, consumption of both tea
and coffee went on expahding during the period. Hence, the
main reason for having the country's tea consumption
increased during the period appears to lie in the consumers
willingness to spend more on tea out of their augmented real
income.
It is a clear indication that the French tea market
is still unsaturated.
Accordingly, the per capita tea
consumption in the country rose from a triennial average of
0.07 kg. in 1970-72 to 0.15 kg, in 1979-81 and further to
0.18 kg. in 1986-88 (table 3.24).
IMPORTS OF INDIAN TIU
The France's imports of Indian tea rose from a
triennial average of 6 million kgs in 1970-72 to 9.5 million
kgs in 1979-81; then it declined to 7 million kgs in 1987-
89. Over the period, it decreased by a compound rate of
0.9'2 per cent. Bifurcating the entire period, it
experienced a rapid growth at a compound rate of 5.4 per
cent in the 70s against a steep decline at ,a compound rate
of 5.25 per cent in the 80s (table 3.19). The estimated

egression equation with log specification of France's
demand for imports of Indian tea shows a pmr goodness of
fit as is explained only to the extent of 15.95 per cent in
terms of +(table 3.23). Yet, elasticities with respect to
relative price and Gross Domestic Product are statistically
significant at 5 per cent level and carry a negative and a
positive sign respectively as theoretically expected; the
value of the former is 2.6088 and latter 0.8321. It implies
that Indian tea in French market is incompetitive in terms
of price. However, one of the reasons for having made the
country's imports of Indian tea to undergo a gradual decline
during the period appears to have arose from the growth in
the tea consumption in the country consequent upon the
country's Gross Domestic Product augmented.
JAPAN
PROFILE
Japan is a tea producing country with a global
share of 8.2 per cent in the triennium of 1970-72, 7.6 per
cent in 1979-81 and 5.4 per cent 111 1987-89. The country's
domestic tea production stepped up from a trienqial average
of 93 million kgs in 1970-72 to 100.9 million kgs in 1979-
81; then it decreased to 92.2 million kgs in 1987-89. Over
the period, it experienced a slow-moving decline at a

compound rote 0.2 per cent (table 3.1). In spite of the
domestic production, the country imported a considerable
qunntity of tea during the period. The quantum of imports
was larger in the 80s when the domestic production of tea
tiapyencd to face a persistent decline.
Accordingly, the country's tea imports for
consumption slightly declined from a triennial overage of
16.2 million kgs in 1970-72 to 14.8 million kgs in 1979-81;
then it soared to 28.1 million kgs in 1987-88. Over the
period, it experienced an increase at a compound rate of
2.52 per cent. Bifurcating the entire period, it underwent
a steady decrease at a compound rate of 2.53 per cent in the
70s against a marvellous growth at a compound rate of 11.11
per cent in the 80s (table 3.18). The share of India in the
country's tea imports slightly declined from 8.3 per cent in
the triennium of 1970-72 to 8 per cent in 1979-81 and
further to 7.2 per cent in 1987-89. Sri Lanka's share fell
from 22.1 per cent in 1970-72 to 17.3 per cent in 1979-81
and again to 15.2 per cent in 1987-89. China's share skyrocketed
from 0.9 per cent in 1970-72 to 20.2 per cent in
1979-81; then it fairly doubled to 41.6 per cent in 1987-89.
Besides, the country's tea imports consisted on an average,
14 per cent of re-exported tea from United Kingdom in 1970-
72, 11 per cent in 1979-81 and 3.8 per cent in 1987-89. It

is observed that Indian tea enjoyed the fourth largest share
in the Japanese total tea imports through out the period
(table 3.14).
COWSlRLPTION PATTERN
Domestic production and net imports of tea
co~istitute the total amount of tea consumed in Japan in any
year of the period . The per capita tea consumption in the
country dropped from a triennial average of 1.02 kgs in
1970-72 to 0.97 kg. in 1979-81; then it slightly improved
to 0.97 kg. in 1987-89 (table 3.24). The estimated
regression equation of Japanese demand for imports of tea
for consumption shows
goodness of fit as is explained to
2
the extent of 66.59 per cent in terms of [I (table 3.20).
The co-efficient with respect to Gross Domestic Product only
is statistically significant at 1 per cent level which
carries a positive sign as theoretically expected; the value
is 0.2518.
It implies that the main reason for having the
country's tea imports for consumption augmented during the
period appears to lie in the consumers' need for maintaining
the same level of tea drinking against the back drop that
domestic tea production dwindled.

IrPOBTS OF INDIM TEA
Japan's imports of Indian tea slightly declined
from a triennial average of 1.3 million Kgs in 1970-72 to
1.1 million Kgs in 1979-81; then it doubled to 2.2 million
Kgs in 1987-89. Over the period, it grew by a compound rate
of 1.71 per cent, Bifurcating the entire period, it
experienced a steep decline at a compound rate of 5.19 per
cent in the 70s against a rapid growth at a compound rate of
7.99 per cent in the 80s (table 3.19). The estimated
regression equation with log specification of the Japanese
demand for imports of Indian tea shows poor goodness of fit
as is explained only to the extent of 35.06 per cent in
terms of ff2 (table 3.23). The elasticity with respect to
Gross Domestic Product only is statistically significant at
1 per cent level which carries a positive sign as
theoretically expected; the value is 0.2867. It implies
that one of the reasons for having a moderate increase in
the Japanese imports of Indian tea during the period appears
to have been slightly actuated by the country's augmented
National Income which was, however, to be spent on the
importation of a,ny
tea.

AUSTRALIA
Australia accounted for 4.1 per cent of the world
net tea imports in the triennium of 1970-72, 2.8 per cent
in 1979-81 and 1.8 per cent in 1987-89. The country's total
tea imports steeply declined from a triennial average of
28.1 million kgs in 1970/71-1972/73 to 23.1 million kgs in
1978/79-1980/81 and further to 18.6 million kgs in 1987/88-
1989/90. On an average, 2.8 per cent and 1 per cent of the
total tea imported into the country were re-exported in the
70s and 80s respectively.
India's share in the Australian
tea market slightly fell from 11.2 per cent in the triennium
of 1970/71-1972173 to 10.3 per cent in 1978/79-1980/81 and
considerably to 5.4 per cent in 1987/88-1989/90.
Sri Lankan
share nearly halved from 45.5 per cent in 1970/71-1972173 to
25 per cent in 1978/79-1980/81 and again to 11.3 per cent in
lY87/88 - 1989190.
Indonesian share slightly improved from
33.5 per cent in 1970/71-1972173 to 36.7 per cent in
1878/79-1980/81; then it declined to 33.5 per cent in
1987/88-1980/90. And the Paupa New Guinea's share skyrocketed
from 2.1 per cent in 1970/71-1972173 to 19 per cent
in 1978/79-1980/81; then it continued to improve to the tune
of 24 per cent in 1987/88-1989/90.
And the Chinese share
soared from 1.2 per cent in 1970/71-1972173 to 5.9 per cent

in 1978179-1980/81 and further to 17.4 per cent in 1987188-
1989/90. It is observed that Indian tea which had got the
third largest share in the Australian market in the early
70s, has been lowered to the fifth place in the late 80s
(table 3.15).
Tea consumption in Australia shows a steady
downward trend. The country's tea imports for consumption
dropped from a triennial average of 26.6 million kgs in
1970-72 to 23 million kgs in 1979-81 and further to 18.6
million kgs in 1987-89. Over the period, it decreased by a
compound rate of 2.25 per cent. Bifurcating the entire
period, it experienced a steady decline at a compound rate
of 2.13 per cent and 2.42 per cent in the 70s and 80s
respectively (table 3.18). The estimated regression
equation with log specification of Australian demand for
imports of tea for consumption shows goodness of fit as is
explained to the extent of 86.6 per cent in terms of R~
(table 3.21). The elasticity with respect to Gross Domestic
Product is statistically significant at 10 per cent level
and carries a positive sign as theoretically expected; the
value is meagre, to the amount of 0.1699. And the
elasticity with respect to population is statistically

significant at 1 per cent level, but carries a negative sign
contrary to the theoretical expectations; the value is
1.3912. Other variables considered here are not
significant. Provided that the income elasticity is meagre
and less statistically significant, it can be implied that
the country's tea consumption decreased during the period
appears to have been actuated by the shift in the consumers
preferences or habits Accordingly, the country's per cagi ta
tea consumption dropped from a triennial average of 2.66 kgs
in 1970-72 to 2.27 kgs in 1979-81 and further to 1.66 kgs in
1981:-R8 (table 3.24).
IYMWS OP INDIAN TEA
Australia's imports of Indian tea declined from a
triennial average of 2.4 million kgs in 1970/71-1972173 2.4
nlillion kgs in 1978/79-1980/81 and again to 1 million kgs in
1987/88-1989/90. Over the period, it registered a decrease
at a compound rate of 7.75 per cent. Bifurcating the
entire period, it declined moderately by a compound rate of
2.38 per cent in the 70s and steeply by 10.29 per cent in
the 80s (table 3.19). The estimated regression equation
with log specification of Australian demand for Indian tea
shows goodness of fit as is explained to the extent of 67.44
per cent in terms of table 3.23). The elasticity with

espect to relative price only is statistically significant
at 1 per cent level which carries a negative sign as
theoretically expected; the value is 5.9324. It implies
that Indian tea in the Australian market is vulnerable to
competition. Mence, the main reason for having the
country's imports of Indian tea decreased during the period
appears to lie in the lack of competitiveness of Indian tea
in terms of price.
NEI ZEALAND
MARKET PROFILE
New zealand accounted for 1.2 per cent of the
World net tea imports in the triennium of 1970-72, 0.8 per
cent in 1979-81 and 0.5 per cent in 1987-89. The country's
total tea imports dropped from a triennial average of 7.6
million kgs in 1970-72 to 5.8 million kgs in 1979-81 and
further to 5.3 million kgs in 1987-89. On an average, 0.4
per cent and 0.8 per cent of the total tea imported into the
country were re-exported in the 70s and 80s respectively.
India's share in the total tea imports of the country
slbghtly improved from 4.4 per cent in the triennium of
1970-72 to 5 per cent in 1979-81; then it nearly halved to
2.7 per cent in 1987-89. Sri Lanka's share nearly halved
from 80.2 per cent in 1970-72 to 46.1 per cent in 1979-81

and further fairly to 17.1 per cent in 1987-89. Indonesia's
share slightly declined from 10.1 per cent in 1970-72 to 8.4
per cent in 1979-81; then it soared to 24.4 per cent in
1987-89. Chinese share sky-rocketed from 1.8 per cent in
1970-72 to 28.6 per cent in 1979-81 and again to 37.1 per
cent in 1987-89. It is observed that Indian tea which had
got the third largest share in the New Zealand market in the
early 705, has been lowered to the fifth place in the late
80s (table 3.16).
CONSUYPTION PATTERN
Tea consumption in New zealand shows
a steady
downward trend during the period. The country's tea
imports for consumption declined from a triennial average of
7.6 million kgs in 1970-72 to 6.7 million kgs in 1979-81 and
again to 5.2 million kgs in 1987-89. Over the period, it
decreased steadily by a compound rate of 2.24 per cent.
Bifurcating the entire period, it registered a slow decline
at a compound rate of 0.67 per cent in the 70s against a
rapid one at compound rate of 3.07 per cent in the 80s
(table 3.18). The estimated regression equation with log
specification of New zealand's demand for imports of tea for
consumption for the period, 1970-88 shows goodness of fit as
is explained to the extent of 66.16 per cent in terms of R'

(table 3.21).
The elasticity with respect to Gross Domestic
Product is statistically significant at 5 per cent level and
carries a positive sign as theoretically expected;
the
value is meagre, to the amount of 0.2793.
And the
elasticity with respect to population is statistically
significant at 1 per cent level but carries a negative sign
contrary to the theoretical expectation; the vnlue is
2.2235. Other variables considered here are not significant.
It implies that the major reason for having the country's
tea consumption decreased at a compound
rate of 2.1 per
cent over the period appears to lie in the shift in the
consumer's preferences or habits.
1.t is because that the
country's augmented per capita income could not reverse the
present downward trend in the tea consumption in the country
is due to the meagreness of
the positive elasticity with
respect to the Gross Domestic Product.
Accordingly, per
capita tea corlsumption in thc country dropped fro~n a
triennial average of 2.66 kgs in 1970-72 to 2.17 kgs 111
1979-81 and further to 1.66 kgs in 1986-88 (table 3.24).
IWCNITS OF INDIAN TEA
New Zealand's imports of Indian tea slightly
improved from a triennial average of 338 tonnes in 1970-72
to 933 tonnes in 1975-77; then it steeply declined to 340

tonne8 in 1979-81 and further to 144 tonnes in 1987-89.
Over the period, it decreased by a compound rate of 7.83 per
cent. Bifurcating the entire period, it experienced n
fantastic growth at n compound rate of 11.95 per cent in
the 70s against a steep decline at a compoutld rate of 10.93
per cent in the 80s (table 3.19). Unfortunately, the
estimnted regression equntions wit11 and without 101:
specifications of the New Zealand's imports of Indian tea
show poor goodness of fit. None of the variables considered
here are statistically significant (tables 3.22 and 3.23).
SAUDI ARABIA
MARKm PROFILE
Saudi Arabia accounted for 0.9 per cent of the
World net tea imports in the triennium of 1970-72, 1.9 per
ccnl in 1979-81 und 1.7 per cent in 1987-89, 'Tllc country's
total tea imports rose from a triennial average of 15.6
million kgs in 1970-81 to 16.6 million kgs in 1987-89.
India's share in the Saudi tea market mounted up from 14.8
per cent in 1979-81 to 20.7 per cent in 1987-89. Sri
Lnnka's share rose from 63.3 per cent in 1979-81 to 66.2 per
cent in 1987-89. And the share of tea re-exported from the
United Kingdom slightly dropped from 12.8 per cent in 1979-
81 to 10.2 per cent in 1987-89. It is observed that Indian

tea enjoyed the second largest share in the Saudi market
throughout the period (table 3.17).
Tea consumption in Saudi Arabia shows a swift
upwa~d trend during the period. The country's tea imports
for consumption nearly tripled from a trlennial average of
5.8 million kgs in 1970-72 to 15.2 million kgs in 1979-81,
then, it slightly improved to 17.1 million kgs in 1987-89.
Over the period, it increased by a compound rate of 7.65 per
cent. Bifurcating the entire period, it experienced a
tremendous growth at a compound rate of 11.95 per cent in
the 70s against a moderate growth at a co~npound rate of 1.06
per cent in the 80s (table 3.18). The estimated regression
equation of Saudi demand for imports of tea for consumption
for the period 1970-87 Shows goodness of fit as is explained
to the extent of 77.64 per cent in terms of Ii2 (table
3.20). The co-efficient with respect to population is only
statistically significant at 1 per cent level which carries
a positive sign as theoretically expected; the value is
1.8716. Other variables considered here are not
significant. It implies that the main reason for having the
country's tea consumption increased.at a compound rate of
9.07 per cent over the period appears to lie in the spread

of tea drinking habit among the growing population of the
country. Accordingly, the per capita tea consumption in the
country augmented from a triennial average of 0.9 Kg, in
1972-75 to 1.65 Kgs in 1979-81; then it slightly decreased
to 1.26 Kgs in 1987-89 (table 3.24).
IYPORTS OF INDIAN TEA
Saudi Arabia's imports of Indian tea soared from a
triennial average of 2.3 million kgs in 1979-81 to 3.4
million kgs in 1987-89, showing a rapid growth at a
compound rate of 5,56 per cent (table 3.19). The estimated
regression equation of Saudi demand for Indian tea for the
period 1978-89 shows an unsatisfactory goodness of fit as is
explained only to the extent of 31.68 per cent in terms of
R~ (table 3.22). However, the coefficient with respect to
relative prices is statistically significant at 5 per cent
level and carries a positive sign contrary to the
theoretical expectations; the value is 5.0777. It indicates
that Indian tea is competitive in the Saudi market in terms
of price. That Indian tea does not face any kind of
competition in the Saudi market is due to the fact that the
present level of tea imports into the country is not
sufficient to meet the pressure of the demand consequent
upon the spread of tea drinking habit in the country.

To conclude, tea drinking became a habit among the
people of all walks of life in England by the dawn of the
17th century.
India exported eight chests of Indian tea to
London in the year 1839 for the first time.
Global tea
production as well as exports increased during the period of
the study.
India maintained number one psition both in
production and exports through out the period. Tea prices
in the London Spot Market erratically fluctuated during the
period. However, there is a commentable positive
correlation between world tea prices vis-a-vis global tea
production alid world tea exports and world tea prices.
There had been market diversions from the traditional
markets to the new markets situated in the developing
countries.
Still, United Kingdom is the world's largest tea
importer, followed by U.S.A. During the period, tea
consumption in the United Kingdom, Canada, Ireland and
Australia continued to decline; while it registered an
increase ill U.S.A.,
and Saudi Arabia.
The Netherlands, Germany, France, Japan
When U. K., U.S.A., Canada, Ireland, the
Netherlands, France, Australia and New Zealand decreased the
intake of Indian tea, West Germany, Japan and Saudi Arabia
absorbed more of the same during the period.

8
180."
>.I
: brld ~ r h t i m of T u (htcy Ulae) - 19M b 1969
(in mllllon kgd
d8h
Lank8
,
1977
17'8
1
19'9
(38.3)
556.3
(32.7)
563.8
132.2)
541.8
(29.9)
(2,5)
38.0
(212)
38.0
(2.2)
36.1
(2.0)
(14.7)
208.6
(12.3)
199.0
(11.3)
206.4
(11.31
(4.6)
64.3
(3.0)
73.2
(4.2)
90.8
(5.0)
252.0
(lb.8)
268.0
(15.3)
271.0
(15.2)
(7.5)
102.3
(6.0)
104.7
(6.0)
98.0
(5A)
(4.6)
86.3
(5.1)
93.4
(5.31
99.3
(5*5)
(2.1)
31.1
(119)
31.7
(1.0)
32.6
(1.8)
(6.9)
106.4
(6,2)
111.2
(6.3)
117.6
(6.5)
(2.6)
21.6
(1,3)
26.2
(1.5)
32.1
(1.8)
(100)
1818.7
(100)
40.0 191.4 98.7 303.7 102.3 89.9 29.9 129.8 20.6 1848.0
(100) /
1702.6 /
1100)
1151.4
'$31
'982
1953
' ' 9 4
1 ' : "
I
'3:1
I:jr
559.6
(29.7)
560.7
(28.8)
581.5
(28.3)
639.9
(29.21
656.2
(28.71
6620.
(27.2)
665.3
41.1
(2.2)
40.9
(2.1)
43.7
(2.1)
30.2
(1.7)
43.3
(1.9)
31.6
210.1
111.2)
188.6
(9.7 1
180.0
(8,8)
209.2
(9.5 1
215~3
(9.41
212.1
(1.6) (9.3)
40.6 214.6
(28.4) (1.7) (9.2
700.0 43.6 228.2
( (28.31 ( 1.8) (9.2 )
: I 1 391 208.0
/ (28.1) ( 1.6) (8.5 )
108.7
(5.8)
W.2
(4.6)
111.6
(8.4)
126.2
(5.8)
132.3
6.8)
129.5
342.5
(18.2)
397.0
(20.4)
400.6
(19.5)
414.1
(10.9)
432.3
(18.9)
460.5
(5.7)
126.1
(20.2)
508.0
(5.4) (21,7)
133.81 545d
( 5.4) (22.0)
1414 534.9
( 5.8)1 (22.0)
102.3
(5.4)
98.5
(5.1)
102.1
(5.01
92.5
14.2)
95.5
(P.2)
93.6
90.9
(4.8)
96.0
(4.9)
119.7
(5.8)
116.2
(5.3)
141.1
(6.4)
143.3
32,C 131.5 29.8 1803.5
(1.1) (7.2) (1.6) (loo)
35.5 139.8 36.9 1946.5
(2.0) (7.2) (1.9) (100) 1
32.0 145.6 31.5 2054.0
11.6) (7.1) (1.8) (loo)
31.5 151.1 42.0 2192.9
(1.1) (6.9) (1.9) (100)
40.0 152.1 29.0 2288.1
(1.7) (6.6) (1.3) (100)
39.0 146.6 40.9 2219.8
120.0 35.0 12145.1 1
(4.1) (6,3) (1.7) (6.4) (1.8) (100)
96.3 155.8 31.9
(4.1) (6.6) (1.4) (5.1) (1,s) (100)
89.8 164.0 40.2 120.0 35.0 2475.1
(3.6) ( 6,631 ( 1.6)1 ( 4.8) ( 1.4) I (100 )
90.5 /
( 3.7) ( 7.4) ( 1.6j1 ( 4.5) (
39,' 1 110." 4:)i 2Wf) 1
I
''J:es in Brcketl are Psrcenta~s to the total
":@: I*tlernstional Tsa Comittes, rlnnual Bvli.tln of Statiltic8, Varioua laruel.

Tale 3.2: &rld Elporb or Tru (CMtry Uiw ) - 1970 to 1989
(in million kg.)
YBar I Indla I 8angla-( Srl I Indw I Chloe I Ksoye I Rslauil Others*l Total
' Includes Teiusn, Iron, Japan, malaysia, Turkey, Uietnem, Burundi, Reuritius, Rozembique,
Rwanda, Tanzania, Uganda, Zslre, Zimbabue, Lrpentine, Brazil, tcuador, Peru, Paupa, New
Guinea, atc.
Figures in Brckete mr. prcentags to ths tatel
Source: International 1.8 Cornittee, Annual Bulletin of Statistics, Vsrious issuss.

Table 3.3: World Production, Exports and Prices of Tea -
1970 to 1989
Year Production in Export in London Price
million kgs. million kgs. per kg. in
pence
1970
1112.5
651.1
45.67
1971
1119.5
681.7
43.25
1972
1203.0
700.2
42.24
1973
1242.9
710.0
43.40
1974
1254.2
731.2
59.89
1975
1290.2
751.4
62.36
1976
1336.1
788.8
84.13
1977
1702.6
812.9
156.33
1978
1753.4
802.7
113.69
1979
1818.7
845.6
102.05
1980
1848.0
858.9
96.12
1981
1883.5
852.0
99.30
1982
1946.5
819.8
110.49
1983
2054.0
870.8
149.58
1984
2192.9
941.4
262.85
1985
2288.7
953.3
158.86
1986
2279.8
973.8
131.96
1987
2345.1
976.1
105.09
1988
2475.7
1036.6
100.84
1989
2433.6
1119.2
125.99
Source: International Tea Committee, Annual Bulletin of
Statistics, 1990.

''3
-'.'Em:
: Nsgligibis
Tel Statiatica, Tea Bosrd of India, Yarioua Inauaa.

lbl 3.6: Pattern or lqmd or Tu into U.K. - l m to 1989
(in inillion kpa)
/--
7 4 2340 2080 763 35,s 9 3 5 6 8 0 251 9 7 1 7.2 1
(100) (88.9) (32.6) (15.2) (4.0) (2.4) (3.4) (10.1) (6.1) (5,O)I ( 3,l)I
1975 219.6 193.4 81.2 27.5 8.41 5.6 6.8 26.5 13.3 8.7) 8.31
':"" :P bP3~kets are percentsqs to tha total.
.:':'" international Tsa Committee, Annual Bullstin of Stetistics, Uarioua la~uaa.

Table 3.7~: Percentage of Consumption of Tea and Other Hot
Bsverrgecr in the U.K.
(in percentages)
Period
(Oct-Mar)
Tea
Coffee
Milk
Other
Beverages
1970-71
72.0
21.0
4.0
3.0
1971-72
70.0
24.0
4.0
2.0
1972-73
70.0
24.0
4.0
2.0
1973-74
69.0
24:O
4.0
3.0
1974-75
68.0
25.0
4.0
3.0
1975-76
1980-81
1981-82
1982-83
67.0
66.5
66.3
64.0
26.0
27.3
27.8
30.3
4.0
-
-
-
3.0
6.2
5.9
5.7
1983-84
64.8
29.3
5.9
Source: U.K. Tea Council, Annual Ileport, Various Issues
Note : From 1980-81 onwards, other bevernges include milk
also
Table 3.7b: Growth in Use of Tea Bags (Percentage Share of
Total Market Volume)
Period
Leaf Tea
Tea Bags
Instant Tea
March 1970
90
9
March 1972
83
17
March 1974
68
32
March 1975
March 1976
64
60
35
40
1
-
Source: U.K.
Tea Council, Annual Report, Various Issues

Table 3.8: Pattern of
of Tea into U.S.A.
Year
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
/ 1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
Source:
issues.
Total
ImpJrts
in
tomes
----
62231
79584
68717
80888
72251
82243
92085
69943
79238
83833
86298
82830
77317
88279
79241
89797
77395
93141
93150
India
11.5
13.0
11.1
7861510.424.917.0
9.3
9.4
9.7
13.4
2.4
7.4
5.0
5.5
3.5
3.7
4.3
3.7
4.3
3.9
4.0
3.5
International
to
Tai-
wan
3.8
4.6
2.6
4.0
5.6
2.8
6.1
4.3
2.9
3.7
4.9
4.6
4.6
7.1
2.6
1.6
1.1
1.2
1.0
Annual
Sri
Lanka
33.6
31.3
28.3
24.2
25.3
25.6
18.1
20.3
18.5
14.6
15.1
15.0
10.5
10.6
12.4
8.6
6.2
6.6
6.3
Tea
the total
Japnn
2.1
1.5
5.4
2.4
2.7
3.9
3.7
4.7
3.7
3.0
2.9
2.9
2.3
2.4
2.6
1.3
1.5
1.3
0.7
Indo-
nesia
15.6
14.5
14.4
16.5
17.8
14.1
16.0
15.6
14.1
16.6
17.0
16.8
18.6
17.6
16.2
18.1
13.4
16.0
13.6
Coamittee,
Percentage
China
----
-
Neg
0.6
0.74.1
1.5
2.9
3.7
4.6
4.2
8.2
9.5
8.3
8.4
8.3
10.9
13.7
18.4
21.6
25.5
21.8
------------
Kenya
11.1
12.2
9.6
2.610.7
9.8
11.6
13.0
10.3
12.0
11.9
8.1
6.4
8.4
5.9
4.5
5.2
4.7
5.4
6.9
6.7
Bulletin
hrge-
ntina
2.0
2.7
2.8
1.4
2.2
2.4
2.6
5.3
9.8
8.8
12.3
11.6
14.8
19.5
20.6
19.2
18.1
20.6
15.3
19.1
of
Brazil
----
1.1
1.7
2.6
3.5
3.3
2.2
2.7
2.5
2.9
4.5
3.3
4.1
4.2
5.1
4.1
5.4
6.2
7.0
4.6
5.3
Statistics,
Net
Imprts
99.6
99.9
99.9
100.0
99.7
99.4
100.0
99.7
99.8
99.8
99.6
99.8
99.9
99.8
99.9
99.9
99.7
93.8
99.9
93.9
various

132
Table
Year
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
Source: Statistics, Various Issues.
3.9: Pattern
Total
Imports
in
tonncs
20716
23512
23840
23567
24369
23648
24170
24816
22150
21650
23187
20977
19974
19838
21097
18017
19799
15882
15784
15461
of Imports of Tea into Canada
India
----
16.7
15.8
14.0
9.4
15.2
16.4
11.2
11.2
4.9
8.7
9.5
9.6
7.2
5.9
9.2
4.8
8.8
3.7
5.9
Sri
Lanka
31,9
28.9
25.3
25.7
23.4
20.3
26.5
22.5
26.9
23.1
23.9
22.4
22.0
18.9
18.4
19.6
23.1
19.3
22.8
5.7 / 22.4
International Tea
Percentage
lndo-
nesia
0.7
1.6
4.3
5.1
6.6
7.1
10.2
8.2
9.6
8.2
7.7
8.5
7.8
8.7
6.4
7.3
6.8
11.0
4.4
8.2
--------
Committee,
to the
China
----
1.6
2.9
3.0
1.3
1.6
2.6
1.4
1.6
2.0
3.0
2.7
5.0
4.9
6.9
6.1
5.9
5.5
5.6
5.2
4.4
Annual
total
Kenya
10.2
6.6
12.2
19.5
17.8
18.0
20.4
15.1
17.9
19.9
16.7
11.4
15.7
12.5
11.6
10.2
10.2
13.2
17.7
Net
Imports
89.5
90.5
88.9
87.0
89.9
88.1
88.9
89.1
89.4
87.7
87.6
89.9
88.6
88.0
87.4
87.4
88.3
89.2
89.3
15.6 91.7
Bulletin of

Source: International Tea Committee, Annual Bulletin of
Statistics, Various Issues.
Table
Year
1970
1971
1972
1973
1974
1975
1976
1977
1978
1970
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
3.10: Pattern
Total
Imports
in
tonnes
11282
12051
12900
10504
12721
14643
10884
16141
11466
13009
16193
13277
10648
11945
11512
11341
13164
12048
11694
11873
of Imports of Tea into Ireland
India
40.6
39.8
48.7
43.1
38.4
48.4
34.8
47.7
39.3
40.1
48.6
44.8
34.2
29.0
24.2
24.3
20.4
28.5
17.0
18.4
Sri
Lanka
20.6
15.0
10.4
12.0
12.4
9.9
9.4
11.0
9.3
13.0
12.2
14.6
16.5
7.7
3.9
3.8
6.2
5.8
6.5
4.4
Percentage
Indo-
nesia
--------
1.0
2.2
2.6
7.1
6.2
7.1
7.3
4.2
8.8
3.3
5.0
2.8
5.6
8.1
10.8
13.3
10.6
6.5
8.5
12.3
--------
to the
China
0.4
3.1
1.9
0.7
0.4
0.4
2.6
1.4
1.2
2.1
0.8
0.5
0.6
0.7
2.1
0.5
-
0.4
0.4
0.3
total
Kenya
12.0
8.6
11.6
13.1
13.9
13.4
17.9
19.1
25.2
28.8
26.7
29.1
30.9
41.0
46.9
37.4
35.3
36.4
44.5
40.1
Net
imports
98.8
99.2
98.7
94.2
94.0
92.5
85.9
92.6
85.0
83.9
87.4
84.9
82.7
91.0
90.0
94.0
85.8
90.3
88.7
89.3

Table
Year
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
Source: Statistics, Various Issues.
3.11: Pattern
Total
Imports
in
tonne6
----
25718
39549
34394
42031
33918
24176
23869
29881
19939
22653
22646
22506
21825
23413
25814
23512
20385
21037
23590
19148
of IMprtS of Tea into the Netherlands
India
8.4
4.5
4.5
5.8
6.9
6.2
5.0
8.7
2.3
5.0
2.8
2.1
2.1
2.4
3.3
2.4
2.3
1.3
1.1
1.8
International
Sri
Lanka
10.9
7.6
7.5
6.8
6.4
7.9
13.1
7.8
9.0
9.4
9.8
9.0
11.6
7.1
7.7
5.8
10.6
8.5
6.5
10.1
Tea
Percentage
Indo-
nesia
26.4
21.2
22.5
11.8
12.2
21.2
19.8
17.4
16.3
15.6
18.6
18.6
12.9
10.4
16.0
20.9
25.0
16.8
17.9
15.7
--------
Committee,
to the
China
1.3
1.4
2.4
1.5
3.7
3.4
4.6
4.0
3.3
7.4
7.5
6.1
3.5
3.1
3.0
5.7
7.7
10.1
7.2
8.7
Annual
total
Kenya
----
10.4
7.1
8.3
9.5
9.9
9.1
12.3
11.8
11.5
15.0
13.2
11.2
9.4
11.4
10.2
8.4
10.5
14.6
12.7
Net
imports
31.9
21.1
24.6
21.2
26.4
36.2
39.0
32.2
43.5
39.3
41.1
41.8
44.0
40.3
35.8
39.8
46.3
46.2
40.7
126 / 49.9
Bulletin of

Table
Year
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
Source:
Statistics, Various Issues.
3.12: Pattern
Total
Imports
in
tonnes
9255
9769
10007
10733
9480
10302
11437
13438
12728
15289
16256
17151
17603
16422
19825
19513
19186
17487
18895
20738
International
of Imports of Tea into lest Germany
India
45.1
44.6
45.1
43.7
45.4
43.6
40.6
39.1
38.1
38.1
34.3
34.8
32.4
32.8
31.2
27.8
28.2
30.7
30.9
25.3
Sri
Lanka
29.6
31.7
26.3
29.3
23.7
21.0
23.1
20.9
19.9
24.4
22.3
23.1
24.5
16.7
15.4
12.9
16.1
21.7
16.3
16.7
Tea
Percentage
Indo-
nesia
--------
14.8
11.0
10.4
8.2
9.5
11.3
12.1
9.2
9.6
7.9
7.2
6.6
6.1
8.1
8.1
7.5
9.9
12.2
8.3
7.0
--------
Committee,
to the
China
1.4
1.4
2.5
2.0
2.5
3.8
6.0
5.9
8.2
10.5
14.6
13.4
12.7
15.2
17.9
21.1
15.5
13.3
10.0
9.5
Annual
total
Kenya
2.2
2.0
3.2
3.9
4.6
3.5
3.9
2.8
3.2
2.8
3.2
2.4
2.2
1.5
1.4
1.7
2.1
2.6
2.6
1.2
Net
imports
95.0
83.1
99.5
96.3
160.6
100.0
99.7
90.8
92.7
91.8
91.6
89.2
88.1
85.9
86.3
79.4
80.8
86.9
72.0
70.4
Bulletin of

Table 3.13:
Pattern of Imports of Tea into France - 1972 to
1989
Year
1070
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
Source: Statistics, various issues.
Total
Imports
in
Tonnes
3221
3615
4130
4733
5034
5277
6395
6572
6215
7364
9047
8665
7882
9505
9133
9643
10720
9835
10831
11026
International
India
12.9
13.8
21.8
14.5
17.3
13.6
12.2
14.6
9.9
11.9
11.7
10.5
12.0
11.3
8.7
6.3
6.4
7.5
6.6
5.9
Percentage
Sri
Lanka
-------
57.6
53.4
43.4
50.2
47.9
39.0
39.4
37.4
38.5
36.3
30.3
35.7
33.9
34.8
34.3
33.3
33.8
34.9
29.6
26.3
-------
Tea
to the
Indo-
nesia
0.7
0.5
0.3
0.2
0.5
0.3
0.5
0.4
0.9
1.1
1.3
1.2
1.2
0.5
1.5
1.6
3.3
4.2
4.9
4.9
Committee,
total
China
18.4
20.6
21.8
26.2
23.9
34.3
35.3
29.4
37.5
38.3
44.9
43.6
42.0
39.7
40.5
44.4
44.8
39.5
44.8
42.0
Annual
Net
lmports
99.5
99.4
99.4
98.9
97.8
99.1
98.6
97.9
98.1
96.5
96.6
95.5
96.2
94.1
92.4
94.9
93.6
93.0
93.8
91.5
Bulletin of

Source: International Tea Committee, Annual Bulletin of
Statistics, Various Issues.
Table
Ycnr
-
1970
1971
1972
1073
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
3.14: Pattern
Total
Imports
in
tonnes
-
15552
14119
18921
21803
15052
16789
15752
13831
12174
14329
16228
13889
11536
11984
15588
22868
26276
26306
27259
30848
of Iqmrts of Tea into Japan
India
-
6.5
10.6
7.9
6.7
7.9
6.3
4.9
7.0
7.2
8.4
7.5
8.0
10.0
8.9
7.0
4.6
4.2
5.3
6.5
9.9
Sri
Lanka
-
23.5
27.5
15.4
13.8
17.1
12.2
13.7
17.1
18.8
18.2
16.0
17.6
23.3
21.5
21.7
15.7
14.1
13.4
15.2
17.0
Percentage
U.K.
-
12.0
15.3
14.6
17.6
33.5
26.2
25.0
29.0
25.0
12.8
11.3
11.0
11.8
9.3
6.4
4.7
4.7
3.9
4.2
3.4
--------
to the
China
-
0.2
0.8
1.6
2.9
2.9
2.5
2.9
6.9
7.0
23.0
20.3
17.3
14.5
18.9
14.5
41.6
41.1
42.8
42.7
39.2
total
Taiwan
-
57.0
43.4
58.1
54.9
29.6
47.2
49.9
35.2
34.2
34.6
30.6
31.4
21.9
22.6
20.7
21.2
25.0
23.4
19.4
17.5
Net
Imports
-
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0

Table 3.15:
Year
ending
30th
June
1970-71
1971-72
1972-73
1973-74
1974-75
1975-76
1976-77
1977-78
1078-78
1979-80
1980-81
1981-82
1982-83
1983-84
1984-85
1985-86
1986-87
1987-88
1988-89
1989-90
Source: Statistics, Various Issues.
Pattern
Total
Imports
in
tonnes
27330
28974
27948
26478
27443
25845
27363
23243
23331
23959
22156
23387
21477
21934
20411
20669
19607
19022
18916
17771
International
of Imports of Tea into Australia
India
------
12.3
10.1
11.3
14.1
14.7
11.7
23.5
10.3
10.5
10.4
10.1
7.6
12.2
7.4
7.3
4.7
5.5
5.0
6.4
4.9
Sri
Lanka
51.5
45.7
45.2
40.9
39.8
40.0
36.9
38.2
28.7
25.8
21.2
25.3
16.0
10.
19.0
14.4
10.1
10.1
10.7
13.1
--------
Tea
Percentage
Indo-
nesia
29.4
35.5
35.6
35.6
33.6
38.4
24.7
31.3
38.9
36.7
34.5
35.7
37.9
42.7
I
34.2
39.9
38.3
34.0
35.4
31.0
Committee,
to the
Paupa
New
Guina
0.3
2.0
3.9
6.3
6.9
7.2
11.1
13.1
15.7
18.9
22.5
20.7
21.7
22.6
I 22.5
24.0
23.4
25.8
22.2
-
Annual
total
China
1.4
1.5
0.8
0.7
1.4
0.7
1.8
1.5
1.8
6.3
9.7
9.4
8.9
11.7
I
10.8
11.6
14.5
17.5
13.3
21.4
Net
Imports
97.2
96.8
97.8
96.9
96.4
97.6
98.2
96.3
99.0
99.1
98.7
99.3
99.2
99.2
99.1
98.8
98.9
98.8
-
-
Bulletin of

Table
Year
-
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
Source: Statistics, Various Issues.
3.16: httern
Total
Importe
in
tonnes
-
7087
7690
8116
7733
7492
7368
7107
8936
6297
7077
6553
6705
6274
6294
5978
5829
5629
5615
5322
4967
International
of Imports of Tea into New Zeland
India
-
4.2
4.0
5.0
3.7
4.4
8.3
14.3
13.1
9.0
7.1
3.6
4.2
1.7
2.8
3.8
4.2
4.3
3.3
1.5
3.3
Sri
Lanka
-
88.9
82.8
68.8
70.2
64.5
52.8
56.4
43.2
57.3
59.6
43.2
35.9
56.5
28.7
30.3
25.2
27.6
17.6
17.8
15.9 1 30.5 / 24.1 / 7.8 I 99.5 /
--------
Tea Committee, Annual Bulletin of
Percentage
Indo-
nesia
-
2.7
9.3
18.2
21.0
21.6
16.9
6.7
1.0
2.4
3.0
6.3
15.9
5.7
16.5
14.5
21.6
20.7
21.4
21.2
to the
China
-
0.7
1.6
3.2
2.4
7.3
16.5
14.5
35.0
24.0
24.4
36.0
25.3
24.5
36.4
36.3
31.2
27.7
43.2
43.9
total
Paupa
New
Guina
-
0.7
0.4
0.9
0.6
1.2
2.5
1.5
2.4
4.4
4.4
6.4
4.3
5.6
11.0
10.8
10.4
9.6
3.8
3.0
Net
Imports
-
99.1
99.5
99.7
99.6
99.5
99.7
99.7
99.7
99.6
99.6
99.3
99.4
99.4
99.3
99.4
99.1
99.0
97.8
99.3

Table 3.17: Phtters of Imports of Tea into Saudi Arabia
Year
1977
1978
Total
Imports
in Tonnes
-----
7441
16744
Percentage to the total
India SriLanka U.K Netlmports
5.6
12.2
56.1
63.5
15.2
10.1
-
-
1979
1980
14301
15732
11.2
22.1
60.0
62.3
13.5
10.4
-
1981
16856
11.1
67.2
14.5
1982
18216
13.8
56.6
11.7
1983
20609
11.1
60.9
12.3
1984
21045
19.0
62.8
13.1
1985
17713
21.8
77.7
13.7
1986
1987
1988
1989
17713
18359
16582
14882
13.9
20.3
18.6
23.5
70.3
66.7
64.8
67.2
-----
13.2
10.9
12.4
6.7
-
-
-
Source: International Tea Committee, Annual Bulletin of
Statistics, Various Issues.

Idla 3.10: 1wb or T u fur Cmuptlm In Ewh Cmtrs - 1970 +A 1989
(In dlllon kpe)
/
18.0
10.9
-----
.:'::', 'nternatlonal Tea Cmlttoe, Annual Eulletln of Stetiatics, Uaiioua lasuea.

.'"s ;~aainthheas ilndie~te the 't' valusa
%,< .
,, ;:'lricant at 1 per cent level
..gP~'lcalt at 5 psi osnt lsvel
a _
.Qrl'lcant at 10 per cent lsvsl

T&l.
3.P: Rsgmim E q u l l a of Oand for Iwrta of Indim T r , Vlri~us Cantrima
I
Ireland
TheNetherlands
234.110 -2.2605" 0.9794*
( 2.02) ( 2.41) ( 2.20)
301.600 -1.86471 0.2936s
( 3 1 ( 1 8 ( 1.91)
I
0.3688 6.259
0.425 8.021
1
i i
2.4437 1970-89 1
1.6546 1970-89
1 1
Figures In parmnthsace indicate ths 't' vsluea
Significant st 1 per cent love1
* Significant at 5 per cent level
Slgnlficant at 10 per cent levsl

T.bls 3.23: R.9-lrn Ewtiam or Demnd for Iworta of Indlan Tea, Varlous Casltrlea
lop X D ~
- lnd + @ lo 2 + p 1nY + ln t
2 2
pu
Elasticitlms of 1
Countries
Constent Relativa COP
prioa
0
=1 I '32
Iraland 14.201
(2.71 )
The Nltherlands 33.729
(4.23 )
Fi9urss in perentheaer indicate the 't' valuea
'* Significant at
1 per cent lsvel
" Signiflcent at 5 per cent lsvel
' Slgnlflcant at 10 per cent lsvsl

~.blm 3.24: w t Cmwqtlm of Tea Per bad In Uulwa Cantrlvs
(Triannial Puarapa in Kpa)
/united France
hat
Germany
-
0.15
0.15
Irelend
(Republlc)
4.01
3.83
Nether-
Ianda
0.63
0.69
Cnnada
0.94
0.96
0.34
0.36
- 1 1.02
-
1.05
2.06 2.66
2.07 2.69
I
0.11
3.78
0.66
0.94
0.36
0.93
1.06
1.96
2.48
1974-761 1.11
1975-77 3.46
1916-78 3.30
0.10
0.11
0.12
0.17
0.19
0.20
5-65
3.91
3.47
0.66
0.67
0.66
0.94
0.94
0.91
0.31
0.38
0.31
0.L8
0.96
0.98
1.02
1.02
0.99
1.912 1.311
I
1.84 2.52
1.73 1 2.39
1977-79 3.14 0.12 0.21
Source: Internetionel Tea Committee, Rnnuel Bulletin of Statiatica, Uarioua 183~~8.

CRAPTGR 4
THE WORLD COFFEE UARKFP
This chapter presents a brief history of India's
export trade in coffee and discusses the trends in, and
pattern of, coffee consumption in the select export markets
with which India trades in coffee.
HISTORICAL PERSPECPIVE
Although the coffee plant is believed to be a
native of abysinnia, the inmates of the shehodet monastery
in Yemen are first to have tasted this beverage in the
early years of the 15th century. Coffee soon became an
established beverage among the Arabs and Turks and entered
Europe through Venetian commerce during the 17th century.
The first Coffee House in London was set up in 1652 and such
Coffee Houses became fashionable and popular in Britain.
Eventhough global coffee prices started
declining from the year 1879, the period till 1895 was one
of the steady growth for the world coffee industry.
The impact of World War I on coffee was also
proved to the adverse because of difficulties
in obtaining freight space and steep increase

in dutles on the product. The year 1940 proved to be the
year of over-production of coffee. With the coffee
valorisalion scheme in force in Brazil - the world's largest
coffee producer - price fluctuations were contained within
limits and the Indian producers could get some relief.
Besides, during the same year, a serious situation arose
from the collapse of France and the over-running of other
European countries by Germany during World War I1 - markets
which had absorbed 66 per cent of India Coffee exports, were
lost. In response to a strong plea from the producers for
the government's intervention, the Ind1a11 coffee market
expansion ordinance was introduced in December 1940
providing for the constitutlon of a coffee market expansion
board (India) wt~ictl took over the Indian coffee cess
committee with additional duties and powers, After that,
global coffee prices increased tremendously but till the
late 50s; then it continued to decline till the end of the
60s. Of course, cashew industry in India registered a
phenomlnal progress during the period, 1940 to 1970.
10BU) COFFEE PROW(XION:1970-89
World coffee production increased from a triennial
average of 4695 million kgs in 1970-72 to 5268 million kgs
in 1979-81 and further to 6025 million kgs in 1987-89,

showing an overall growth at a compound rate of 1.89 per
cent. India accounted for 1.7 per cent of the global coffee
production in the triennium of 1970-72, 2.4 per cent in
1979-81 and 2.9 per cent in 1987-89. Brazil, the largest
coffee producer in the World, accounted for 28.8 percent in
1970-72, 28 per cent in 1979-81 and 28.2 per cent in
1987-89. Columbia, the second largest producer accounted
for 13.6 per cent in 1970-72, 14.2 per cent in 1979-81 and
11.2 per cent in 1987-89. India has got the seventh place
among the twenty two major coffee producing countries in the
world (table 4.1).
MBLD COFFEE EXWRTS: 1970-89
The global coffee exports considerably increased
from a triennial average of 3320.7 million kgs in 1970-72 to
3781.1 million kgs in 1979-81 and further to 4497.9 million
kgs in 1987-89. Over the period, it grew by a compound rate
of 1.71 per cent. Bifurcating the entire period, it
experienced a rapid growth at a compound rate of 4.76 per
cent in the 70s against a moderate growth at a compound
rate of 2.48 per cent in the 80s. India's share in global
coffee exports improved from 1.3 per cent in the triennium
Of 1970-72 to 2.1 per cent in 1979-81 and maintained the
same too in 1987-89. Columbia's share rose from 11.6 per

cent in 1970-72 to 16.3 per cent in 1979-81; then it
dropped to 13.8 per cent in 1987-89. Kenya's share slightly
bettered from 1.7 per cent in 1970-72 to 2.2 per cent in
1979-81; then it declined to 2.1 per cent in 1987-89.
Tanzanian share gradually declined from 1.3 per cent in
1970-72 to 1.2 per cent in 1979-81 and to 1.1 per cent in
1987-89. Costa Rica's share modestly increased from 2.1 per
cent in 1970-72 to 2.3 per cent in 1979-80 and again to 2.9
per cent in 1987-89. Ecuador's share strengthened from 1.6
per cent in 1970-72 to 1.7 per cent in 1979-81 and further
to 2.9 per cent in 1987-89. Elsalvador's share slightly
advanced from 3.8 per cent in 1970-72 to 4 per cent in 1979-
81; then it dropped to 2.6 per cent in 1987-59. Mexico's
share steadily swelled from 2.8 per cent in 1970-72 to 3.8
per cent in 1979-81 and further to 4.9 per cent in 1987-89.
Brazil's share dropped from 30 per cent in 1970-72 to 19.2
per cent in 1979-81; then it improved to 21.1 per cent in
1987-89. Ethiopia's share slightly declined from 2.3 per
cent in 1970-72 to 2.2 per cent in 1979-81 and again to 1.9
per cent in 1987-89. Angola's share steeply declined from
5.3 per cent in 1970-72 to 1.3 per cent in 1979-81 and
further to 0.2 per cent in 1987-89. Indonesia's share
steadily mounted up from 2.8 per cent in 1970-72 to 5.9 per
cent in 1979-81 and further to 7 per cent in 1987-89. Coste
d' Ivoire's share slightly improved from 5.6 per cent in

1970-72 to 6.1 per cent in 1979-81, then it fell to 4.1 per
cent in 1987-80. The share of Medagascar slightly improved
from 1.6 per cent in 1970-72 to 1.7 per cent in 1979-81,
then it sank to 1.1 per cent in 1987-89. Uganda's share
fell from 5.7 per cent in 1970-72 to 3.4 per cent in 1979-
81; then it slightly improved to 3.5 per cent in 1987-89.
The share of Zair dropped from 2 per cent in 1970-72 to 1.8
per cent both in 1979-81 and 1987-89. And the stinre of
Gautemala steadily escalated from 3 per cent in 1970-72 to
3.3 per cent in 1979-81 and further to 3.5 per cent in 1987-
89. India has got the twelfth place among the seventeen
major coffee exporting countries in the world (table 1.2).
It is remarkable that when the world coffee
exports experienced a rapid growth at a compound rate of
1.71 per cent during the period, 1970-89, exports from
Angola declined app~llingly by a compound rate of 16.89 per
cent, from Madagascar steadily by 1.18 per cent, from Cote
D'Ivore moderately by 0.82 per cent, from Elsalvador slowly
by 0.31 per cent and from Brazil torpidly by 0.15 per cent
(table 4.2).
World coffee prices are represented by the prices
quoted in New York Spot Market; for, not only is U.S.A. the

largest importer of coffee in the world but most of the
trade in coffee take place in New York. During the six
year period of 1970-75, coffee prices escalated moderately
and stood at an average of 57.9 cents per pound with
standard deviation of 9.77 cents. Then, prices surprisingly
sky-rocketed to 141.96 cents in 1976 and again to 229.21
cents in 1977. After that, it suddenly dropped to 155.15
cents in 1978; then it maintained a level, on an average,
135.76 cents with a standard deviation of 20.97 during the
ten year period of 1979-88. Again it considerably dropped
to 91.67 cents in 1989 (table 4.3).
The estimated simple regression equations of (i)
New York coffee prices (Yi) is a function of the world
coffee production (Pi) and (ii) The world coffee exports
(Xi) is a function of New York coffee prices (Yi) are given
below.
(i) New York coffee prices (Yi) 011
world coffee production
(ii) World coffee exports (Xi) on New York coffee prices
(Yi)

It reveals that coefficients of determination (R')
between coffee prices and coffee production and coffee
exports and coffee prices tend to zero. Hence the estimated
equations (i) and (ii) fall to show any kind of
relationship. It can mainly be attributed to frequent
market intervention exercised by International Coffee
Organisation (ICO) through its policy of imposing quota on
coffee exporting countries with a noble objective of
stabilising coffee prices in the international market.
During the period of the study, international trade in
coffee underwent quota system thrice viz, in 1970-72,
1980-85 and 1987-89.
COFFEE IYPORTS: 1970-89
World coffee imports increased from a triennial
average of 3355.7 million Kgs in 1970-72 to 3843.2 million
Kgs in 1979-81 and further to 4494.1 million Kgs in 1987-89,
showing an overall increase at a compound rate of 1.68 per
cent. Bifurcating the entire period, it experienced a slow
growth at a compound rate of 0.88 per cent in the 70s
against a rapid growth at a compound rate of 2.23 per cent
in the 80s (table 4.4). According to trade nomenclature,
there are four types of coffee viz. (i) Columbian Milds,

(ii) Other Milds, (iii) Brazilian and Other Arabicas and
(iv) Hobusta.
Indian coffee is grouped under Other Milds.
Columbian Milds accounted for, on an average, 18.4 per cent
of the ICO members' total imports in the 70s and 20.2 per
cent in the 80s; Other Milds 26.5 per cent in the 70s and
27.5 per cent in the 80s; Brazilian and Other Arabicus 27.3
per cent in the 70s and 27.9 per cent in the 80s and Hobusta
27.9 per cent in the 70s and 24.4 per cent in the 80s.
Columbian Milds is the least among all the groups and
considered to be the superb.
The present study makes an attempt to nr~alyse the
pattern of imports of coffee into U.S.A., U.K., Australia,
Belgium, Canada, France, Germany, Italy, Japan, The
Netherlands, Spain, Sweden and Switzerland over a twenty
year period of 1970-89.
These thirteen countries together
accounted for about 81.4 per cent of the world coffee
imports in the triennium of 1970-72, 79.6 per cent in 1979-
81 and 78.3 per cent in 1987-89. Further, around 34 per
cent of India's coffee exports were directed to these
markets in the triennium 1970-71 to 1972-73, 47 per cent in
1978-79 to 1981-82 and 34 per cent in 1986-87 to 1988-89
(table 4.6).

UNITED STATES
MARKET PROFILE
U.S.A. accounted for 37.3 per cent of the world
coffee imports in the triennium of 1970-72, 28.6 per cent in
1979-81 and 24.7 per cent in 1987-89. The country's coffee
imports dropped from a triennial average of 1253.2 million
kgs in 1970-72 to 1100.8 million kgs in 1979-81; then it
slightly improved to 1111.4 million kgs in 1987-89. Over
the period, it declined slowly by a compound rate of 0.76
per cent. Bifurcating the entire period, it experienced a
steep decline at a compound rate of 1.85 per cent in the 70s
against a slow growth at a compound rate of 0.82 per cent in
the 80s (table 4.4). U.S, coffee market is preponderant of
Other Milds. The country's total coffee imports consists.
on an average, 43.6 per cent of Other Milds, 22.5 per cent
of Brazilian and Other Arabicas, 15.7 per cent of Robusta,
14.9 per cent of Columbian Milds and 3.2 per cent of the
coffee re-exported from non-producing countries in the
quinquennium of 1985-89. India's share in the U.S. coffee
market was 1.3 per cent in the same period (The Coffee Board
of India, Bangalore).

The estimated regression equation of U.S. demand
for imports of coffee for consumption for the period 1970-
89 shows moderate goodness of fit as is explained only to
the extent of 41.46 per Cent in terms of R' (table 4.10).
The co-efficient with respect to price alone is
statistically significant at 5 per cent level which carries
a negative sign as theoretically expected. But the value is
meagre to the amount of 0.082. It implies that
unprecedented rise in coffee prices during the period
appears to have slightly set back coffee consumption in the
country. Accordingly, per capita coffee consumption fell
from a triennial average of 6.13 kgs in 1970-72 to 4.88 kgs
in 1979-81 and again to 4.48 kgs in 1987-89 (table 4.12).
It is obvious that the estimated price elasticity
is not the main reason for having coffee consumption
dwindled in the country. Surveys conducted by International
Coffee Organisation (I .C.O.) reveal the nature and pattern
of tea drinking habit prevailing in the United States.
Coffee drinking in U.S. per person per day declined from a
triennial average of 2.47 cups in 1970-72 to 2 cups in 1979-
81 and again to 1.73 cups in 1987-89. Regular coffee is
more drunk than soluble one to the tune of a decadel average
of 1.56 cups against 0.67 cup in 1970-79 and a decadel

average of 1.37 cups against 0.46 cup in 1980-89.
Drinking
of decaffenated coffee fell from a triennial average of 0.61
cup in 1970-72 to 0.33 cup in 1979-81; then it slightly rose
to 0.4 cup in 1987-89 (table 4.7).
Further, it elucidates coffee drinking habit among
the different age groups.
Younger age groups, say, below
the age of 25 years, drink less and the age groups above 40
years drink more. Interestingly, the age groups between 25
and 40 years drink moderately. However, coffee drinking
among all the age groups declined during the period. For
example, coffee drunk by 10-14 age groups per day declined
from a triennial average of 0.12 cup in 1970-72 to 0.07 cup
in 1979-81 and again to 0.03 cup in 1987-89;
15-19 age
group, from 0.64 cup in 1970-72 to 0.3 cup in 1979-81 and
further to 0.21 cup in 1987-89; 20-24 age group, from 1.66
cup in 1970-72 to 1.04 cup in 1979-81 and again to 0.63 cup
in 1987-89; 25-29 age group, from 2.62 cup in 1970-72 to
1.68 cups in 1979-81 and again to 1.28 cups in 1987-89; 30-
39 age group, from 3.61 cup in 1970-72 to 2.69 cups in
1979-81 and further to 2.04 cups in 1987-89; 40-49 age
group, from 3.86 cups in 1970-72 to 3.25 cups in 1979-81 and
again to 2.66 cups in 1987-89; 50-59 age group, from 3.51
cups in 1970-72 to 2.59 cups in 1979-81 and further to 2.92
cups in 1987-89; 60-69 age group, from 2.96 cups in 1970-72

to 2.63 cups in 1979-81 and ngain to 2.54 cups in 1987-89;
and the 70 and above age group, from 2.42 cups in 1970-72 to
2.N cups in 1979-81 and again to 1.87 cups in 1987-89.
Further more, males are always ahead of females in coffee
drinking. Cups drunk by males per day averaged around 2.32
against, by females, 2.17 in the 70s and around 1.95 against
1.74 in the 80s (table 4.8).
Moreover, it is noticed that US people drink more
at home and less at eating places; however, lhe cups of
coffee drunk in both locations experienced a considerable
decline over the period, 1979-89. Coffee cups per person
per day averaged 1.91 at home and 0.2 at eating places in
the quinquennium of 1970-74; then it declined and averaged
1.24 at home and 0.14 at eating places in 1985-89.
Interestingly, coffee drunk at working places slightly
increased from 0.28 cup to 0.33 cup during the same periods.
Again, it is observed that US people drink more with
breakfast, then between meals and less with other meals. In
addition, coffee drinking with other meals declined
considerably during the period. Accordingly, coffee wlth
breakfast per person per day averaged 1.02 cups, between
meals 0.77 cup and with other meals 0.61 cup in the
quinquennium of 1970-74; then it averaged down to 0.86 cup,
0.63 cup and 0.27 cup respectively in 1985-89 (table 4.9).

It is already noted in the third chapter that per
capita tea consumption in the country mare or less stagnated
during the period. Therefore, another reason for having
coffee consumption declined during the period appears to lie
in the chronological shift in the consumers' preferences or
habits to soft drinks.
ufX!m PROPILE
UNITED KINGDOM
United Kingdom accounted for 3 per cent of the
world coffee imports in the trienneium of 1970-72, 2.3 per
cent in 1979-81 and 2.7 per cent in 1987-89. The country's
coffee imports dropped from a triennial average of 100.6
million kgs in 1970-72 to 88.5 million kgs in 1979-81; then
it rose to 120.3 million kgs in 1987-89. Over the period,
it increased moderately by a compound rate of 0.92 per cent.
Bifurcating the entire period, it experienced a steep
decline at a compound rate of 2.17 per cent in the 70s
against a rapid growth at a compound rate of 4.67 per cent
in the 80s (table 4.4). U.K. coffee market is preponderant
of Robusta The country's total coffee imports consisted, on
an average, 42.7 per cent of Robusta, 25.4 per cent of
Columbian Milds, 19.9 per cent of Other Milds, 11.5 per cent
of Brazilian Milds and 0.4 per cent coffee re-exported from

non-producing countries in the quinquennium of 1985-89. The
share of Indian coffee in U.K market stood at around 0.27
per cent during the same period. (The Coffee Board of India,
Bangalore)
WNSUYPTIOW PATTERN
The estimated regression equation with log
specification of U.K's demand for imports of coffee for
consumption for the period, 1970-89 shows goodness of fit as
is explained to the extent of 74.41 per cent in terms of R'
(table 4.11).
The elasticities with respect to coffee
prices and population are statistically significant at 1 per
cent level and carry a negative and a positive sign
respectively as theoretically expected;
the value of the
former is, however, meagre to the amount of 0.3919 and
latter large enough to the extent of 14.356. Besides, the
elasticity with respect to coffee-tea relative prices are
statistically significant at 1 per cent level but carries a
positive sign contrary to the theoretical expectations; but
,the value is meagre, to the tune of 0.4202.
But the
influence of Gross Domestic Product on the country's coffee
imports is not statistically significant. It implies that
the main reason for having the country's coffee consumption
increased during the period appears to lie in the spread of

coffee drinking habit in the country even at the cost of tea
drinking. Nevertheless, rise in coffee prices during the
period seems to have slightly set back coffee consumption in
the country due to negative price elasticity. Accordingly,
U.K's per capita coffee consumption increased from a
triennial average of 1.86 kgs in 1970-72 to 2.45 kgs in
1979-81; then it slightly dropped to 2.41 kgs :n 1987-89
(table 4.12).
HARIm PBOFILg
AUSTRALIA
Australia accounted for 0.7 per cent of the world
coffee import in the triennium of 1970-72, 0.8 per cent in
1979-81 and 0.7 per cent in 1987-89. The country's coffee
imports increased considerably from a triennial average of
22.2 million kgs in 1970-72 to 31.2 million kgs in 1979-81
and then slightly to 32.8 million kgs in 1987-89. Over the
period, it increased by a compound rate of 2.24 per cent.
Bifurcating the entire period, it experienced a rapid
growth at a compound rate of 2.44 per cent in the 70s
against a slow decline at a compound rate of 0.07 per cent
in the 80s (table 4.4).

The estimated regression equation of Australia's
demand for imports of coffee for consumption for the period
1970-89 shows goodness of fit as is explained to the extent
of 67.23 per cent in terms of R' (table 4.10). The coefficient
with respect to population alone is statistically
significant at 1 per cent level which carries a positive
sign as theoretically expected; the value is 1.6569. It
implies that the major reason for having the country's
coffee consumption increased during the period appears to
lie in the spread of coffee drinking habit in the country.
In consequence, the country's per capita coffee consumption
mounted up from a triennial average of 1.77 kgs in 1970-72
to 2.28 kgs in 1979-81; then it slightly fell to 2.6 kgs in
1987-89 (table 4.12).
Belgium accounted for 2.1 per cent of the world
coffee imports in the triennium of 1970-72, 2.6 per cent in
1979-81 and 2.8 per cent in 1987-89. The country's coffee
imports rose from a triennial average of 69.4 million kgs in
1970-72 to 99.9 million kgs in 1979-81 and again to 127.8
million kgs in 1987-89, showing an overall growth at a

compound rate of 3.63 per cent. Bifurcating the entire
period, it increased rapidly by a compound rate of 2.99 per
cent in the 70s and by 3.65 per cent in the 80s (table
4.4). Interestingly, Belgium coffee market is preponderant
of re-exported coffee of all types from non-producing
countries. The total coffee imports of the country
consisted, on an average, 26.5 per cent of re-exported
coffee, 21.6 per cent of Brazilian and Other Arabicas, 21.4
per cent of Robusta, 16 per cent of Other Milds and 15.7 per
cent of Columbian Milds in the quinquennium of 1985-89. The
share of Indian coffee stood at around 5 per cent in the
same period (The Coffee Board of India, Bangalore).
COlYSUYPTION PATTERN
The estimated regression equntion with log
specification of the Belgium's demand for imports of coffee
for consumption for the period, 1970-88, shows goodness of
fit as is explained to the extent of 78.63 per cent in terms
of R' (table 4.11). The elasticities with respect to coffee
prices and population are statistically significant at 1 per
cent level and carry a negative and a positive sign as
theoretically expected; the value of the former is meagre to
the amount of 0.4341 and the latter is large enough, to the
tune of 48.204. Other variables considered here are not

statistically significant. It indicates that unprecedented
rise in coffee prices in the second half of the 70s and in
the first half of the 80s might have slightly set back the
country's coffee imports. However, coffee consumption in
the country increased considerably by a compound rate of
3.63 per cent during the period. This appears to have been
actuated by the spread Of coffee drinking habit in the
country. Accordingly per capita coffee consumption in the
country mounted up from a triennial average of 6.8 kgs in
1970-72 to 7.85 kgs in 1979-81; then it dropped to 6.82 kgs
in 1987-89 (table 4.12).
bWXT PROFILE
CANADA
Canada accounted for 2.5 per cent of the world
coffee imports in the triennium of 1970-72, 2.6 per cent in
1979-81 and 0.8 per cent in 1987-89. The country's coffee
imports went up from a triennial average of 82.5 million kgs
in 1970-72 to 99.9 million kgs in 1979-81 and further to
108.6 million kgs in 1987-89, showing an overall growth at a
compound rate of 1.6 per cent. Bifurcating the entire
period, it experienced a torpid growth at a compound rate
of 0.19 per cent in the 70s against a rapid growth at a
Compound rate of 2.6 per cent in the 80s (table 4.4). The

Canadian coffee market is preponderant of Other Milds. The
country's total coffee imports consisted, on an average,
40.9 per cent of Other Milds, 23.6 per cent of Brazilian and
Other Arabicas, 19.2 per cent of Columbian Milds, 7.3 per
cent of Robusta and 8.9 per cent of re-exported coffee from
non-producing countries in the quinquennium of 1985-89. The
share of Indian coffee in the Canadian market averaged
around 1.4 per cent in the same period (The Coffee Board of
India, Bangalore).
mWSUYPTION PATTERN
The estimated regression equation with log
specification of Canadian demand for imports of coffee for
consumption for the period, 1970-89 shows goodness of fit as
is explained to the extent 01 86.93 per cent in terms of H~
(table 4.11). The elasticity with respect to coffee prices
alone is statistically significant at 1 per cent level which
carries a negative sign as theoretically expected; the value
is meagre, to the amount of 0.2027. It indicates that the
Canadian coffee market is saturated. Therefore, the main
reason for having a moderate growth in the country's tea
consumption appears to have been actuated by the relative
fall in the coffee prices since the mid 70s. The country's
per capita coffee consumption rose from a triennial average

3.86 kgs in 1970-72 to 4.57 kgs in 1979-81; then it declined
to 4.22 kgs in 1987-89 (table 4.12).
UIKm PROFILE
France accounted for 7.48 per cent of the world
coffee imports in the triennium of 1970-72, 8.46 per cent in
1979-81 and 7.43 per cent in 1987-89. The country's coffee
imports soared from a triennial average of 251 million kgs
in 1970-72 to 325.2 million kgs in 1979-81 and further to
333.8 million kgs in 1987-89. Over the period, it
registered a growth at a compound rate of 1.54 per cent.
Bifurcating the entire period, it registered a rapid growth
at a compound rate of 2.67 per cent in the 70s against a
torpid growth at a compound rate of 0.17 per cent in the 80s
(table 4.4). French consume more Robusta than any other
groups. The country's total coffee imports consisted, on an
average, 55.5 per cent of Robusta, 22 per cent of Brazilian
and Other Arabicas, 13 per cent of Other Milds, 8 per cent
of Columbian Milds and 0.7 per cent of re-exported coffee
from non-producing countries in the quinquennium of 1985-89.
The share of Indian coffee in the French market averaged
around 0.6 per cent in the same period (The Coffee Board of
India, Bangalore).

The estimated regression equation with log
specification of French demand for imports of coffee for
consumption for the period, 1970-89 shows goodness of fit as
is explained to the extent of 79.49 per cent in terms of R~
(table 4.11).
The elasticity with respect to coffee prices
alone is statistically significant at 5 per cent level which
carries a positive sign contrary to the theoretical
expectations; the value is meagre to the amount of 0.1213.
It implies that the French coffee market is yet to be
saturated. Accordingly, the country was importing more and
more coffee, even at the higher prices of the late 70s.
The country's per capita coffee consumption rose from a
triennial average of 4.84 kgs in 1970-72 to 5.91 kgs in
1979-81; then it fell to 5.76 kgs in 1987-89 (table 4.12).
WEST GERMANY
MARKET PROFILE
Germany, the largest export market for coffee,
accounted for 9.7 per cent of the world coffee imports in
the triennium of 1970-72, 12.6 per cent in 1979-81 and 14.14
per cent in 1987-89. The country's coffee imports increased
from a triennial average of 325.3 million kgs in 1970-72 to

484.5 million kgs in 1979-81 and again to 648.1 million kgs
in 1987-89. Over the period, it increased by a compound
rate of 4.18 per cent. Bifurcating the entire period, it
experienced a rapid growth at a compound rate of 4.04 per
cent and 3.77 per cent in the 70s and 80s respectively
(table 4.4). The German coffee market is predominant of
Columbian Milds. The country's coffee imports consisted,
on an average, 44 per cent of Columbian Milds, 28.1 per cent
of Other Milds, 16.6 per cent of Brazilian and Other
Arabicas, 9.9 per cent of Robustas and 1.4 per cent of the
re-exported coffee from non producing countries in the
quinquennium of 1985-89. The share of Indian coffee in the
German market was 1.4 per cent in the same period (The
Coffee Board of India, Bangalore).
COIISUYPTIM PATTERN
The estimated regression equation with log
specification of German demand for imports of coffee for
consumption for the period, 1970-88 shows goodness of fit as
is explained to the extent of 68.26 per cent in terms of R'
(table 4.11). The elasticity with respect to Gross Domestic
Product alone is statistically significant at 1 per cent
level which carries a positive sign as theoretically
expected; the value is 0.5919. It implies that the main

eason for having the country's coffee consumption increased
by a compound rate of 4.14 per cent during the period
appears to lie in the rise in the consumers' spending on
coffee out of their augmented per capita real income.
Further, it indicates that German coffee market is yet to
saturate. Accordingly the country's per capita coffee
consumption increased from a triennial average of 5.26 kgs
in 1970-72 to 6.82 kgs in 1979-81 and again to 8.3 kgs in
1987-89 (table 4.12).
ITALY
MARKET PROFILE
Italy accounted for 5.1 per cent of the world
coffee import in the triennium of 1970-72, 5.8 per cent in
1979-81 and 5.9 pr cent in 1987-89. The country's coffee
imports advanced from a triennial average of 172.7 million
kgs in 1970-72 to 224.2 million kgs in 1979-81 and further
to 263.8 million kgs in 1987-89, showing an overall growth
at a compound rate of 2.49 per cent. Bifurcating the entire
period, it experienced a steep growth at a compound rate of
2.33 per cent and 2.08 per cent in the 70s and 80s
respectively (table 4.4). Italian coffee market is
COn~picuous of Robusta. The country's total coffee imports
comprised 47.5 per cent of Robusta, 29.7 per cent of

Brazilian and Other Arabicas, 14 per cent of Other Milds,
7.2 per cent of Columbian Milds and 1.8 per cent of reexported
coffee from non-producing countries in the
quinquennium of 1985-89. The share of Indian coffee in the
Italian market was 1.8 per cent in the same period (The
Coffee Board of India, Bangalore).
The estimated regression equation with log
specification of Italian demand for imports of coffee for
consumption for the period, 1970-89 shows goodness of fit as
is explained to the extent of 86.66 per cent in terms of R~
(table 4.11).
The elasticity with respect to coffee price
is statistically significant at 10 per cent level and
carries a negative sign as theoretically expected; the value
is meagre, to the amount of 0.119. Besides, the elasticity
with respect to population is statistically significant at 1
per cent level and carries a positive sign as theoretically
expected; the value is 8.2236.
Other variables considered
here are not statistically significant. It implies that the
main reason for having the country's coffee consumption
increased during the period appears to lie in the spread of
coffee drinking habit in the country. In consequence, the
country's per capita coffee consumption rose from a

triennial average of 3.2 kgs in 1970-72 to 3.96 kgs in 1979-
81 and again to 4.47 kgs in 1987-89 (table 4.12).
JAPAN
MARKET PROFILE
Japan accounted for 2.5 per cent of the world
coffee imports in the triennium of 1970-72, 4.6 per cent in
1979-81 and 6.1 per cent in 1987-89. The country's coffee
imports zoomed from a triennial average of 83.2 million kgs
in 1970-72 to 175 million kgs in 1979-81 and further to
274.4 million kgs in 1987-89, showing an overall increase at
a compound rate of 7.25 per cent. Bifurcating the entire
period, it experienced a tremendous growth at a compound
rate of 7.37 per cent and 6.11 per cent in the 70s and 80s
respectively (table 4.4). The Japanese coffee market is
more or less equally conspicuous of Robusta, Brazilian and
Other Arabicas and Other Milds. The country's total coffee
imports consisted, on an average, 29.9 per cent of Robusta,
28.4 per cent of Brazilian and Other Arabicas, 24.4 per cent
of Other Milds, 16.5 per cent of Columbian Milds and 0.8 per
cent of the coffee re-exported from non-producing countries.
The share of Indian coffee in the Japanese coffee market was
3 per cent in the same period (The Coffee Board of India,
Bangalore).

The estimated regression equation of Japanese
demand for imports of coffee for consumption for the period,
1970-89, shows goodness of fit as is explained to the extent
of 91.33 per cent in terms of R' (table4.10) The co-
efficient with respect to coffee prices and Gross National
Product are statistically significant at 10 per cent and 5
per cent level respectively and carry a negative and a
positive sign in accordance with the theoretical
expectations; but the values are meagre, the former, to the
amount of 0.1953 and the latter, of 0.1813, so much so that
their influence on the country's coffee imports appear to be
negligible. Yet the co-efficient with respect to population
is statistically significant at 1 per cent level and carries
a positive sign as theoretically expected, the value is
10.621. Ilence, it implies that the main reason for having
the country's coffee consumption increased during the period
appears to lie in the advancement of coffee drinking habit
in the country. Accordingly, the country's per capita
coffee consumption went up from a triennial average of 0.74
kg in 1970-72 to 1.68 kgs in 1979-81 and further to 2.48 kg
in 1987-89 (table 4.12).

THE NBTRBRWNDS
The Netherlands accounted for 3.7 per cent of the
world coffee imports in the triennium of 1970-72, 4.1 per
cent in 1979-81 and 4 per cent in 1987-89. The country's
coffee imports rose from a triennial average of 123.4
million kgs in 1970-72 to 156.4 million kgs in 1979-81 and
again to 180.5 million kgs in 1987-89, showing an overall
growth at a compound rate of 1.92 per cent. Bifurcating the
entire period, it experienced a rapid growth at a compound
rate of 3.41 per cent and 2.69 per cent in the 70s and 80s
respectively (table 4.4). The Columbian Milds is
preponderant in the Netherlands' coffee market. The
country's total coffee imports consisted, on an average, 44
per cent of Columbian Milds, 28.1 per cent of Other Milds,
16.6 per cent of Brazilian and Other Arabicas, 9.9 per cent
of Robusta and 1.4 per cent of re-exported coffee from nonproducing
countries in the quinquennium of 1985-89. The
share of Indian coffee in the Netherlands' coffee market was
0.2 per cent in the same period (The Coffee Board of India,
Bangalore).

The estimated regression equation of the
Netherlands' demand for imports of coffee for consumption
for the period, 1970-89 shows goodness of fit as is
explained to the extent of 72.92 per cent in terms of R'
(table 4.10).
The co-efficient with respect to coffee
prices is statistically significant at 5 per cent level and
carries a negative sign as theoretically expected; but the
value is meagre, to the amount of 0.1181. The co-efficient
with respect to Gross National Product is statistically
significant but only at 10 per cent level and carries a
positive sign as theoretically expected; and the value is
meagre, to the amount of 0.1322. Therefore, the influence
of coffee prices and the Gross Domestic Product on the
country's coffee imports during the period appear to be not
of much significance. Hence, the main reason for having the
country's coffee consumption increased during the period is
due to some other reasons one of which appears to lie in the
spread of coffee drinking habit in the country. Because
the co-efficient with respect to population is statistically
significant at 1 per cent level whose value is -2.8941; sign
of which agrees with the theoretical expectations as well.
Besides, the co-efficient with respect to relative prices of
coffee and tea, which is statistically significant at 5 per

cent level and carries a positive sign but contrary to the
theoretical expectations with a value of 0.2699 is a clear
indication of the consumers' preference for coffee which,
though slight indeed, may be due to a matter of convenience
in preparing coffee over tea. It also appears to have
influenced the country's coffee imports to grow during the
period. Interestingly, the country's per capita coffee
consumption dropped from a triennial average of 8.73 kgs in
1970-72 to 8.42 kgs in 1979-81, then it rose to 9.83 kgs in
1987-89 (table 4.12).
YIW[ET PROFILE
SPAIN
Spain accounted for 2.4 per cent of the world
coffee import in the triennium of 1970-72, 3.3 per cent in
1979-81 and 3.5 per cent in 1987-89. The country's coffee
imports went up from a triennial average of 80.1 million kgs
in 1970-72 to 125.4 million kgs in 1979-81 and further to
156.3 million kgs in 1987-89, showing an over-all growth at
a compound rate of 4.23 per cent. Bifurcating the entire
period, it experienced a rapid growth at a compound rate of
2.91 per cent and 2.71 per cent in the 70s and 80s
respectively (table 4.4).

The estimated regression equation of Spain's
demand for imports of coffee for consumption for the period
1970-89 shows goodness of fit as is explained to the extent
of 80.45 per cent in terms of fi2 (table 4.10). The coefficient
with respect to population alone is statistically
significant at 1 per cent level which carries a positive
sign as theoretically expected; the value is 7.1828. It
implies that the major reason for having the country's
coffee consumption increased during the period appears to
lie in the advancement of coffee drinking habit in the
country. In consequence, the country's per capita coffee
consumption rose from a triennial average of 2.1 kgs in
1970-72 to 2.62 kgs in 1979-81 and further to 3.61 kgs in
1987-89 (table 4.12).
Sweden accounted for 3.1 per cent of the world
coffee imports in the triennium of 1970-72, 2.6 per cent in
1979-81 and 2.1 per cent in 1987-89. The country's coffee
inports slightly fell from a triennial average of 105.1
million kgs in 1970-72, to 98.1 million kgs in 1979-81 and

again to 98.1 million kgs in 1987-89, showing an overall
decline at a compound rate of 0.84 per cent. Bifurcating
the entire period, it registered a moderate decline at a
compound rate of 1.88 per cent in the 70s against a slow
decline at a compound rate of 0.59 ier cent in the 80s
(table 4.4). Swedish coffee market is preponderant of
Brazilian and Other Arabicas. The country's total coffee
imports comprised, on an average, 46 per cent of Brazilian
and Other Arabicas, 41 per cent of Columbian Milds, 12.5 per
cent of Other Milds and 0.4 per cent of Robusta in the
quinquennium of 1985-89. The share of Indian coffee in the
Swedish market averaged around 0.13 per cent in the same
period (The Coffee Board of India, Bangalore).
COIISUYPTION PATTERN
The estimated regression equation of Swedish
demand for imports of coffee for consumption for the period,
1070-88 shows goodness of fit as is explained to the extent
of 61.76 per cent in terms of R' (table 4.10). The coefficient
with respect to coffee prices and Gross Domestic
Product are statistically significant at 1 per cent and 5
Per cent levels respectively and carry a negative and a
positive sign as theoretically expected, the values are,
however, small, the former to the extent of 0.1237 and the
latter, 0.1541. Besides, the co-ef ficient with respect to

elative prices of coffee and tea is statistically
significant at 5 per cent level and carries a positive sign
contrary to the theoretical expectations; however, the value
is meagre, to the amount of 0.1849. As a matter of course,
the positive income co-efficient should have influenced the
country's coffee consumption to grow. Considering the fact
that the Gross Domestic Product in terms of US dollar
increased only by a meagre compound rate of 0.22 per cent
during the period, its impact on tea consumption appears to
be negligible. And also, though there is a slight
preference on the part of the consumers for coffeem tea
during the period, its influence on the country's coffce
consumption appears to be negligible since the size of the
Swedish tea market is small, to the extent of a triennial
average of 2 million kgs in 1970-72, 2.8 million kgs in
1979-81 and 2.7 million kgs in 1987-89. Ilence, the main
reason for having the country's coffee consumption decreased
moderately by a compound rate of 0.86 during the period
appears to lie in the pull of the unprecedented rise in the
world coffee prices after mid 70s. As a result, the
country's per capita coffee consumption dropped from a
triennial average of 13.1 kgs in 1970-72 to 12.17 kgs in
1979-81 and further to 11.27 kgs in 1987-89 (table 4.12).
Of course, Sweden has got the highest per capita coffee
consumption in the world.

Switzerland accounted for 1.9 per cent of the
world coffee imports in the triennium of 1970-72, 0.9 per
cent in 1979-81 and 1.5 per cent in 1987-89. The country's
coffee imports fell from a triennial average of 65.1 million
kgs in 1970-72 to 60.8 million kgs in 1979-81; then it
soared to 67.9 million kgs in 1987-89. Over the period, it
grew by at a compound rate of 0.28 per cent. Bifurcating
the entire period, it experienced a steep decline at a
compound rate of 2,15 per cent in the 70s against a moderate
growth at a compound rate of 1.18 per cent in the 80s (table
4.4). Other Milds is predominant in the Switzerland coffee
market. The country's total coffee is made up, on an
nverage, 39.4 per cent of Other MLlds, 24.9 per cent of
Brazilian and Other Arabicas, 19.1 per cent of Columhian
Milds, 14.9 per cent of Robusta and 1.9 per cent of reexported
coffee from non-producing countries in the
quinquennium of 1985-89. The share of Indian coffee in the
Switzerland coffee market was 3.9 per cent in the same
period (The Coffee Board of India, Bangalore).

The estimated regression equation with log
specification of Switzerland's demand for imports of coffee
for consumption for period, 1970-88 shows moderate goodness
of fit as is explained only to the extent of 41.45 per cent
in terms of R~ (table 4.11). The elasticity with respect to
coffee prices alone is statistically significant at 10 per
cent level which carries a negative sign as theoretically
expected; but the value is meagre, to the amount of 0.1521.
It implies that one of the reasons for having the country's
coffee consumption declined steeply during the 70s appears
to lie in the unprecedented rise in the coffee prices in the
late 70s. Overall, the prices of 80s which maintained a
level lower than that of late 70s but higher than that of
early 70s appears to have slowed down the general declining
trend in the country's coffee consumption so much to 0.29
per cent over the period, 1970-88. In consequence, the
country's per capita coffee consumption declined from a
triennial average of 8.53 kgs in 1970-72 to 7.87 kgs in
1979-81 and further to 6.01 kgs in 1987-89 (table 4.12).
To conclude, coffee became an essential beverage
among the Arabs, Turks and Europeans in the seventeenth
century. The first coffee house in London was set up in the
year 1952. Global coffee production as well as exports

increased during the period of the study. The coffee prices
in the New York Spot Market fluctuated widely during the
period. There is no commendable relationship between world
coffee prices vis-a-vis the global coffee production and
world coffee exports vis-a-vis world coffee prices. U.S.A
is the world's largest coffee importer. Coffee consumption
in U.S.A increased slowly during the period. Imports of
coffee into United Kingdom, Australia, Belgium, Canada,
France, Germany, Italy, Japan, the Netherlands, Spain and
Switzerland increased during the period. Coffee consumption
in Sweden experienced a decline. However, the country has
got the highest per capita coffee consumption in the world.

Table 4.3: World Production, Exports, Imports and Prices of
Coffee - 1970 to 1989
Year Production Export Imports World Price
in Million in Million in Million in cents
kg s kgs kgs per kg.
(i) (ii) (iii) (iV)
1970
3985.0
3278.8
3248.2
50.52
1971
5197.0
3114.6
3361.1
44.66
1972
4903.0
3568.8
3457.7
50.41
1973
4040.0
3803.1
3626.8
62.16
1974
4749.0
3391.3
3419.4
67.95
1975
4430.0
3569.2
3636.8
71.73
1976
3653.0
3654.9
3742.8
141.96
1977
4254.0
2931.3
3110.1
229.21
1978
4726 .O
3429.1
3428.2
155.15
1979
4978.0,
3915.8
3915.8
169.50
1980
4799.0
3720.9
3799.4
150.67
1981
6026.0
3715.6
3814.4
115.42
1982
4957.0
3936.9
3877.9
125.00
1983
5578.0
4038.9
4005.6
127.98
1984
5225.0
4210.3
4037.0
141.19
1985
5940.0
4442.2
4194.2
133.10
1986
5154.0
4086.9
4234.1
170.93
1987
6332.0
4468.6
4547.8
107.81
1988
5664.0
4229.6
4252.9
115.96
1989
6078.0
4795.4
4681.7
91.67
Source: Column (i) F.A.0 Production Year Book
Column (ii) and (iii) F.A.O. Trade Year Book
Column (iv) Statistics on Coffee. I.C.O.

Table 4.5: All Importing Members: Imports of A11 Forms of Coffee
by Group - October-September, 1970/71 to 1989/90
Percentages
Coffee Imports
Year from All exp- Colombi- Other Brazili- Robustas
all orting an Milds Milds an and
sources members
Other
Arabicas
-------
1970171
1971172
1972173
1973174
1974175
1975176
1976177
1977178
1978179
1979180
1980181
1981182
1982183
1983184
1984185
1985186
1986187
1987188
1988189
1989190
Source:
53161
51045
56215
55512
53088
58153
51866
48048
61509
58369
57825
59536
61064
62181
63070
65386
66062
65948
67277
75009
94.8
95.4
94.9
93.9
93.6
93.8
93.1
94.1
93.7
93.6
92.5
92.4
92.6
92.8
92.0
91.5
91.2
91.0
91.0
91.0
15.7
15.4
15.1
18.2
18.6
17.8
16.1
21.5
22.2
23.1
19.1
18.3
19.2
19.1
20.1
21.0
23.9
20.2
19.1
21.7
21.5
21.2
24.1
22.8
29.1
28.9
28.5
30.2
30.0
28.3
28.0
25.6
24.2
25.9
24.3
30.0
31.2
26.9
28.5
30.4
34.7
38.3
32.9
27.0
26.3
21.5
26.8
19.4
22.7
23.1
27.9
29.6
31.7
30.6
32.3
23.2
21.9
29.0
28.5
24.4
-------
International Coffee Organisation, E.B.3275191
28.1
25.1
27.9
32.1
26.0
31.8
28.6
28.9
25.1
25.4
25.0
26.4
25.0
24.4
. 23.4
25.9
23.0
23.9
23.9
23.6

Table 4.7: Revier of Consumption of Coffee in U.5.A (Types and
Regions) - 1970 to 89
Year
1970
1971
1972
1073
1974
1975
1976
1977a
1978a
1979
1980
1981
1982
,1983
1984
1985
1986
1987
,1988
1989
1-
(in cups per person per day)
Types
Region
All
Coffee
Decaff- North North
Regular Instant einated* East Central South
---------
2.57
2.50
2.35
2.30
2.25
2.20
2.11
1.94
1.97
2.06
2.02
1.92
1.90
1.85
1.99
1.83
1.74
1.76
1.67
1.75
-
1.91
1.83
1.67
1.61
1.50
1.52
1.48
1.30
1.30
1.44#
1.40
1.38
1.33
1.31
1.44
1.39
1.37
1.37
1.31
1.43
-
0.66
0.67
0.68
0.69
0.75
0.68
0.63
0.64
0.67
0.62
0.62
0.54
0.56
0.53
0.54
0.42
0.36
0.37
0.34
0.32
0.15
0.16
0.17
0.23
0.27
0.31
0.30
0.27
0.26
0.33
0.34
0.33
0.38
0.39
0.44
0.42
0.41
0.43
0.38
0.40
a - Adjusted to take account of the change from personal to
telephone interviews in 1979 but figures in 1977 were not
adjusted due to technical difficulties.
* - Decaffeinated is not separate from regular and instant coffee
but is included in both types.
# - Includes 0.02 cup of unknown form.
2.30
2.36
2.10
2.12
2.08
1.96
1.87
1.79
1.89
2.83
2.86
2.66
2.74
2.42
2.43
2,48
2.34
2.22
2.011 2.26
1.95 2.34
1.90 2.28
1.851 2.18
1.90
1.90
1.84
1.86
1.75
1.58
1.79
2.06
2.27
2.04
1.92
1.90
1.96
1.98
2.31
2.02
1.97
1.88
2.15
2.09
1.88
1.99
1.89
1.78
1.77
1.69
1.68
1.66
1.84
1.57
1.53
1.58
1.45
1.52
-----
West
2.92
2.77
2.74
2.43
2.37
2.35
2.27
1.98
1.83
2-28
2.09
1.84
1.96
1.86
2.00
2.01
1.70
1.91
1.77
1.81
-
Source: Coffee Winter Drinking Study, International Coffee
Organisation.

(in cup. per psraon psr day)
I
jource:
Coffs~ Winter Drinking Study - lntsrnatlonal Cofree Organisstloo.

Table 4.9: Review of Consumption of Coffee in U.S.A
(Location and Time) - 1970 to 1989
(in cups per person per day)
~ocation
Time of Day
Year
Eating Break Other Between
Home work places
-------
1970 2.06
1971 1.99
1972 1.86
1973 1.83
1974 1.80
1975 1.77
1976 1.70
1977 1.62
1978 1.54
1979 1.48
1980 1.43
1981 1.39
1982 1.36
1983 1.37
1984 1.40
1985 1.29
1986 1.24
1987 1.23
I I
1988 1.19
l9sj 1.23 0.34
0.29
0.29
0.28
0.29
0.27
0.25
0.24
0.16
0.23
0.38
0.40
0.36
0.38
0.33
0.38
0.35
0.31
0.33
I 0.18
0.32
1
0.22
0.22
0.21 1.00 0.59 0.76
0.18 0.56 0.73
0.18 0.98 0.55 0.72
0.18 0.95 0.53 0.72
0.17 0.92 0.51 0.68
0.25 0.91 0.46 0.66
0.20 0.87 ' 0.47 0.63
0.20 0.90 0.43 0.73
0.19 0.89 0.41 0.71
0.17 0.89 0.37 0.66
0.14 0.88 0.36 0.66
0.13 0.89 0.35 0.62
0.17 0.92 0.36 0.71
0.14 0.88 0.30 0.65
0.14 0.84 0.27 0.65
0.14 0.85 0.30 0.61
I I
0.12 0.83 0.25 0.59
0.90 0.22
I 0.63
Source: Coffee Winter Drinking Study, International Coffee
Organisation.

,die 4.1ll; e l m Egrtlms of b.nd for @art8 ~r Collss for Cmauptim, Uuima Cantrlla
,, -

,sbls 4.11: Ry)nuim Etp~tlrm or mm-d for lqorta or corrr ror Caurqtlm, Yariws Cwntrlma
.:mi in parantheass Indicate the 't' valuer
".
..gnillcent et 1 per cent levsl
'13~1fIcant at 5 per cent level
' il5liricant at 10 per cent level
$8, :,

iabl. 4.12: kcqita Coffr CcmmUrn in E d Cwmtry - 1970 ta 1989
(in kilopram.)
Quarterly Statiatioal Bullotin on Coff~s, International Coffaa Organirstion.

Thls chapter depicts the export oriented beginning
of cashew industry in India, deliberates the trends in, and
pattern of, international trade in cashew with special
reference to India's trade and brings out factors
influencing on the consumption of cashew In, and the
importation of Indian cashew into, the select export markets
in the 70s and 80s.
HISIURICAL PERSPECTIVE
Cashew, the native of Brazil, was introduced in
India in the second half of the 16th century. Cashew nut is
the most popular nut among the tree nuts (others being
Almonds, Brazil nut, Hazel nut and Wal nut) due to its
nutritive value and taste. It contains proteins (21 per
cent) fat (47 per cent) carbohydrates (22 per cent), and
also phosphorus, calcium, iron and vitamins.
Between the year 1900 and the outbreak of the
First World War, small quantities of unpeeled cashew
kernels, packed in mango wood cases lined with news papers
were exported from India to Marseilles and occasionally to
London. It was in the year 1920, cashew actually gained

commercial importance when the first shipment of 10160
tonnes of kernels was sent to U.S.A. However, infestation
was a strong problem then and which stood in the way of
expansion of the trade. Later, the introduction of vacuum
packaging method which was able to check the infestation
during the long sea routes, helped expand international
trade in cashew. In consequence, cashew kernel exports from
India increased from 2300 tonnes in 1923 to 13500 metric
tonnes in 1939. After a setback during the World War 11,
the Indian cashew industry re-established itself and the
growth was dramatic till the early seventies.
MRU) WBEI NUT PROWCTION - 1970-89
Global cashew nut production shows a downward
trend during the period, 1970-89. That it declined from a
triennial average of 578.7 million kgs in 1970-72 to 446.8
million kgs in 1979-81 and again to 430 million kgs in 1987-
89 shows a wavering decline at a compound rate of 1.89 per
cent. Bifurcating the entire period, it is observable that
cashew production underwent a steep decline at a compound
rate of 4.32 per cent in the 70s against a torpid decrease
at a compound rate of 0.59 per cent in the 80s. India is
the largest producer of cashew nuts in the world. India's
share in the world cashew nut production improved from 37.5
Per cent in the triennium of 1970-72 to 41.0 per cent in

1979-81, then it declined to 33.3 per cent in 1987-89.
Brazil's share went up from 3.6 per cent in 1970-72 to 17.1
per cent in 1979-81 and further to 26.1 per cent in 1987-89.
Mozambique share fell from 33.8 per cent in 1970-72 to 19.1
per cent in 1979-81 and again to 9.3 per cent in 1987-89.
Tanzania's share dropped from 21.1 per cent in 1970-72 to
9.9 per cent in 1979-81 and further to 4.8 per cent in 1987-
89. And Kenya's share improved from 2.7 per cent in 1970-72
to 3.6 per cent in 1979-81; then it declined to 2.5 per cent
in 1987-89. It is observed that India is the world's
largest cashew producer, followed , at present, by Brazil
(table 5.1).
lORUl CASBBl EXPORTS - 1970-89
In consequence of decline in the global cashew nut
supply, world cashew kernel exports dropped from a triennial
average of 89.6 million kgs in 1970-72 to 69.7 million kgs
in 1979-81, then it improved to 81.6 million kgs in 1987-89.
It shows an unsteady decline at a compound rate of 1.49 per
cent. Bifurcating the entire period, one can find that the
world cashew exports experienced a steep decline at a
compound rate of 3.2 per cent in the 70s against a rapid
growth at a compound rate of 3.45 per cent in the 80s.
India enjoys number one position in the world cashew trade
and the second place goes to Brazil. India's share in the

world cashew exports dropped from 66.6 per cent in the
triennium of 1970-72 to 49.1 per cent in 1979-81 and again
to 46.8 per cent in 1987-89. Brazilian share tripled from
6.7 per cent in 1970-72 to 20.1 per cent in 1979-81; again
it rose to 40.2 per cent in 1987-89. Mozambique's share
declined slightly from 22.9 per cent in 1970-72 to 21.4 per
cent in 1979-81 and further considerably to 12.5 per cent in
1987-89. Kenya's share rose from 0.1 per cent in 1970-72 to
3.1 per cent in 1979-81; then it slightly fell to 2.9 per
cent in 1987-89. And Tanzania's share increased from 2.6
per cent in 1970-72 to 6.2 per cent in 1979-81; then it fell
to 2.4 per cent in 1987-89 (table 5.2).
WORLD CASHEW PRICES - 1970-89
World cashew prices are represented by the prices
quoted in the New York Spot Market; because United States
absorbs about half of the world supply of cashew kernels.
Cashew price for the grade 320 in the New York Spot Market
averaged around 74 pence per pound in the triennium of 1970-
72; then it suddenly soared to 101 pence in 1973 and
continued to rise till it arrived at 213 pence in 1977
when the world cashew market was disrupted as a consequence
of the socio-political developments in East African
countries of Mozambique and Tanzania, which culminated in
the destruction of the edifice of their primary markets for

cashew nuts. Again, it started to rise and arrived at 313
pence in 1981. During the four year period of 1982-85, it
averaged around 233 pence. Then, it zoomed to 320 pence in
1987 but to fall to 231 pence in 1989 (table 5.3).
The estimated simple regression equations of (i)
cashew price in the New York Spot Market( Yi) is a function
of Global cashew nut production( Pi) and (ii) World cashew
kernel exports( Xi) is a function of cashew kernel prices in
the New York Spot Market (Yi) show moderate goodness of fit
as are explained only to the extent of 46.06 per cent and
39.82 per cent respectively in terms of R ~ . The equations
are
(i)
Cashew price (Yi) on cashew production (Pi)
(ii) Cashew exports (X ) on cashew prices (Y )
1 i
It implies that (i) the actual or anticipated
global cashew nut production is one of the determinants of
the cashew kernel prices in the New York Spot Market and
(ii) quantum of world cashew kernel exports is partially
determined by the cashew prices prevailing in the New York
Spot Market.

Cashew kernel is traded in in almost all parts of
the world. Besides cashew producing countries, the major
COnSUming countries are U.S.A., erstwhile U.S.S.R., United
Kingdom, Germany, Canada, Belgium, Australia, the
Netherlands, Japan, Sweden and New Zealand. However, the
present study is confined to seven major cashew importing
countries viz. U.S.A., Canada, U.K., the Netherlands,
Germany, Japan and Australia, which altogether accounted for
about 67.9 per cent of the world cashew imports in the
triennium of 1970-72, 68.2 per cent in 1979-81 and 72.4 per
cent in 1987-89 (table 5.4). Around 58 per cent of India's
cashew exports were directed to these markets in the
triennium of 1970-71 to 1972-73, 47 per cent in 1978-79 to
1980-81 and 62 per cent in 1988-87 to 1988-89 (table 5.5).
UNITED STATES
U.S.A., the largest export market for cashew,
accounted for 50.4 per cent of the world cashew imports in
the triennium of 1970-72, 43.9 per cent in 1979-81 and 49.2
per cent in 1987-89.
The country's cashew kernel imports
considerably declined from a triennial average of 45.2
million kgs in 1970-72 to 30.6 million kgs in 1979-81;
then

it improved to 40.2 million kgs in 1987-89. It shows an
overall unsteady decline at a meagre compound rate of 0.3
per cent over the period. Bifurcating the entire period,
it is noticeable that cashew consumption in the country
underwent a steep decline at a compound rate of 3.71 per
cent in the 70s against a rapid growth at a compound rate of
3.53 per cent in the 80s. Indian cashew is predominant in
the U.S. cashew market, followed by Brazilian one. As a
matter of fact, India's share in the U.S. cashew imports
fairly halved from 57.1 per cent in the trienr~ium of 1970-72
to 25.9 per cent in 1979-81, after that, it improved to 47.4
per cent in 1987-89. Brazil's share fairly tripled from
10.7 per cent in 1970-72 to 33.5 per cent in 1979-81 and
then it arrived at 36.6 per cent in 1987-89.
Mozambique's
share slightly improved from 28 per cent in 1970-72 to 29.3
per cent in 1979-81; then it appalingly fell to 6.5 per cent
in 1987-89. Kenyan share mounted up from 0.3 per cent in
1970-72 to 1.5 per cent in 1979-81; then it dropped to 0.9
per cent in 1987-89 (table 5.6).
The estimated regression equation with log
specification of U.S. demand for imports of cashew for
consumption for the period, 1970-88 shows an unsatisfactory
goodness of fit as is explained only to the extent of 21.89

per cent in terms of R' (table 5.14) Inspite of this, the
elnsticity with respect to cashew prices is statistically
significant at 5 per cent level and carries a negative sign
as theoretically expected, the value is 0.5341. It implies
that one of the reasons for having the country's cashew
consumption declined by a compound rate of 0.4 per cent
during the period appears to lie in the pull of the rising
cashew prices, particularly that of after the mid 70s.
Accordingly, the country's per capita cashew consumption
declined from a triennial average of 0.27 kg. in 1970-72 to
0.13 kg. in 1979-81; then it slightly improved to 0.17 kg.
in 1987-89 (table 5.17).
IMPORTS OF INDIAN CASHEW
U.S. imports of Indian cashew experienced a
downward trend at a compound rate of 2.24 per cent during
the eighteen year period of 1970-87. In absolute terms, the
country's imports of Indian cashew fell from a triennial
average of 25.7 million kgs in 1970-72 to 8.2 million kgs in
1979-81; then it improved to 22.5 million kgs in 1985-87
(table 5.6) The estimated regression equation with log
specification of U.S. demand for imports of Indian cashew
for the period shows moderate goodness of fit as is
explained only to the extent of 39.7 per cent in terms of R'
(table 5.16) Yet, the elasticities with respect to relative

cashew prices and the real Gross Domestic Product are
statistically significant at 1 per cent level; the value of
the former is 4.2527 which carries a negative sign as
theoretically expected, and of the latter, 1.9306 which too
carries a negative sign but contrary to the theoretical
expectations. Hence, the major reason for having the
country's Indian cashew imports declined during the period
appears to lie (i) largely in the lack of competitiveness of
Indian cashew in terms of price and (ii) partially in the
U.S. preference for other cashews over Indian one. For
example, that the country bettered its imports of Brazilian
cashew during the period appears to be a matter of
geographical proximity. Accordingly, U.S. imports of
Brazilian cashew rose from a triennial average of 4.8
million kgs in 1970-72 to 10.1 million kgs in 1979-81 and
further to 17.2 million kgs in 1985-87.
CANADA
YILBRGT PROFILE
Canada accounted for 7.8 per cent of the world
cashew imports in the triennium of 1970-72, 4.6 per cent in
1979-81 and 4 per cent in 1987-89. The country's cashew
imports decreased from a triennial average of 6.3 million
kgs in 1970-72 to 3.2 million kgs in 1979-81 and further to

3 million kgs in 1987-89, showing an overall decline at a
compound rate of 3.61 per cent. Bifurcating the entire
period, it is observable that cashew consumption in the
country experienced a moderate decline at a compound rate of
1.41 per cent in the 70s against a rapid growth at a
compound rate of 2.51 per cent in the 80s. Indian cashew
enjoyed predominance in the Canadian cashew market in the
70s but, later, in the 80s, it was Brazil that captured the
mnrket. Accordingly, India's share in the total cashew
imports of the country fell appallingly from 72.4 per cent
in 1970-72 to 17.7 per cent in 1979-81 and again to 13.8 per
cent in 1987-89. Brazilian share sky-rocketed from 0.9 per
cent in 1970-72 to 18.1 per cent in 1979-81 and further to
47.4 per cent in 1987-89. Interestingly, market share of
cashew re-exported from U.S.A. zoomed from 2.4 per cent in
1970-72 to 30.0 per cent in 1979-81; then, it declined to
25.0 per cent in 1987-89 (table 5.7).
The estimated regression equation with log
specification of Canadian demand for imports of cashew for
consumption for the period, 1970-88, shows goodness of fit
as is explained to the extent of 72.3 per cent in terms of
R~ (table 5.14) The elasticity with respect to cashew
Prices are statistically significant at 1 per cent level and

carries a negative sign as theoretically expected, the value
is 0.9141. The elasticity with respect to Cross Domestic
Product is statistically significant but only at the level
of 10 per cent which carries a negative sign contrary to the
theoretical expectations; the value is 0.984. And also the
elasticity with respect to Time-trend is statistically
significant at 1 per cent level and carries a positive sign,
the value is 0.6734. It indicates that the main reason for
having the country's cashew consumption decreased at a
compound rate of 4.17 per cent during the period appears to
lie in (i) the pull of the unprecedented rising cashew
prices particularly that of after the mid 70s, (ii) the
marginal reduction in the consumers spending on cashew and
(iii) the spread of cashew eating habit with respect to time
having been overtaken by relatively higher and more
significant negative price elasticity with respect to cashew
prices. Accordingly, the country's per capita cashew
consumption declined from a triennial average of 0.25 kg. in
1970-72 to 0.13 kg. in 1979-81 and it maintained the same
level too in 1987-89 too (table 5.17).

Canadian imports of Indian cashew steadily
decreased from a triennial average of 4.5 million kgs in
1970-72 to 0.6 million kgs in 1979-81 and again to 0.4
million kgs in 1985-87, showing an overall decline at a
compound rate of 16.8 per cent during the period (table
5.7). The estimated regression equation of Canadian demand
for imports of Indian cashew during the period, 1970-87
shows goodness of fit as is explained to the extent of 82.55
per cent in terms of RQtable 5.15). The co-efficient with
respect to relative prices is statistically significant at 1
per cent level and carries a negative sign as theoretically
expected; the value is 1.7439. And also, the elasticity
with respect to Gross Domestic Product is statistically
significant at 1 per cent level but carries a negative sign
contrary to the theoretical expectations, the value is
0.6733. It implies that the major reasons for having the
country's imports of Indian cashew declined during the
period appear to lie in (i) the lack of competitiveness of
Indian cashew in the Canadian market in terms of price (ii)
the country's preference for buying cashew from other
countries and (iii) the proportionate fall in the imports of
Indian cashew in accordance with the country's dwindling
cashew imports.

UNITED KINGLIOM
The United Kingdom accounted for about 2.6 per
cent of world cashew imports in the triennium of 1970-72,
3.5 per cent in 1979-81 and 5.2 per cent in 1987-89. The
country's cashew imports steadily mounted up from a
triennial average of 2.3 million kgs in 1970-72 to 2.6
million kgs in 1979-81, and again to 4.2 million kgs in
1987-89, showing a rapid growth at a compound rate of 2.36
per cent. Bifurcating the entire period, the country's
cashew consumption registered a growth at a compound rate of
2.78 per cent and 7.24 per cent in the 70s and 80s
respectively. Indian cashew is predominant in the U.K.
market. However, the share of India in the country's total
cashew imports appallingly declined from 76.9 per cent in
1970-72 to 22.4 per cent in 1979-81; then, it improved to 54
per cent in 1987-89 (table 5.8).
CONSUMFTION PATTERN
The estimated regression equation with log
specification of U.k's demand for imports of cashew for
consumption for the period, shows a moderate goodness of fit
as is explained only to the extent of 42.34 per cent in

terms of R' (table 5.14). The elasticity with respect to
cashew prices is statistically significant at 5 per cent
level and carries a negative sign as theoretically expected;
the value is 0.6116. And also, the elasticity with respect
to Time-trend is statistically significant at 1 per cent
level and carries a positive sign; the value is 0.5336. It
implies that the spread of cashew eating habit in the
country appears to have partially effected an increase in
the country's cashew imports at a compound rate of 1.86 per
cent during the period in which the downward pull of the
statistically less significant negative elasticity with
respect to cashew prices seems to have subsided. The
country's per capita cashew consumption stood at a triennial
average of 0.04 kg. in 1970-72 and 1979-81; then it declined
to 0.07 kg. in 1987-89 (table 5.17).
IYPORTS OF INDIAN CASHEW
Imports of Indian cashew into United Kingdom
declined from a triennial average 1519 tonnes in 1970-72 to
572 tonnes in 1979-81; then it rose to 2269 tonnes in 1987-
89. Over the twelve year period of 1978-89, it experienced
a tremendous growth at a compound rate of 16.65 per cent
(table 5.8). The estimated regression equation with log
specification of U.Kts demand for imports of Indian cashew

for the period 1978-89 shows goodness of fit as is explained
to the extent of 89.26 per cent in terms of a2 (table 5.16).
The elasticities with respect to relative price and Gross
Domestic Product are statistically significant at 5 per cent
and 1 per cent level respectively and carry a negative and a
positive sign as theoretically expected; the value of the
former is, small to the amount of 0.6536 and the latter
5.7606. It implies that Indian cashew is incompetitive in
the British market to some extent in terms of price. Yet,
the main reason for having the country's imports of Indian
cashew increased tremendously during the period appears to
lie in the increase country's spending on cashew kernels out
of its augmented Gross Domestic Product.
NETHERLANDS
UARmT PROFILE
The Netherlands accounted for 1.8 per cent of the
world cashew Imports in the triennium of 1970-1972, 4.3 per
cent in 1979-81 and 3.3 per cent in 1987-89. The country's
cashew imports rose from a triennial average of 1.6 million
kgs in 1970-72 to 3 million kgs in 1979-81; then it fell to
2.8 million kgs in 1987-89. Over the period, it registered
an unsteady growth at a compound rate of 1.86 per cent.
Bifurcating the entire period, it is observable that the

country's cashew consumption experienced a rapid growth at a
compound rate of 8.79 per cent in the 70s against a moderate
decline at a compound rate of 1.26 per cent in the 80s.
Indian cashew is preponderant in the Netherlands' cashew
market. However, the share of India in the total cashew
imports of the country dropped from 43.8 per cent in 1970-72
to 34.9 per cent in 1979-81; then it rose to 62.2 per cent
in 1987-89 (table 5.9).
The estimated regression equation with log
specification of the Netherlands' demand for imports of
cashew for consumption for the period 1970-88 shows goodness
of fit as is explained to the extent of 62.19 per cent in
terms of u2 (table 5.14). The elasticities with respect to
cashew prices and real Gross Domestic Product are
statistically significant at 5 per cent level and carry a
negative and a positive sign respectively in accordance with
the theoretical expectations; the value of the former is
0.5282 and the latter, 0.6158. And also the elasticity with
respect to Time-trend is statistically significant at 5 per
cent level and carries a positive sign, the value is 0.3519.
Yere, the influence of the comparatively smaller elasticity
with respect to cashew prices on the country's cashew

consumption appears to have subsided in the upward push of
the consumers willingness to spend more on cashew coupled
with chronological spread of cashew eating. This effected
an increase in the country's cashew imports so much at a
compound rate of 1.76 per cent during the period. Of
course, the country's per capita cashew consumption rose
from a triennial average of 0.56 kg in 1970-72 to 0.87 kg in
1979-81; then it slightly declined to 0.84 kg in 1987-89
(table 5.17).
IYWBTS OF INDIAN CASHEV
The Netherlands' imports of Indian cashew
erratically increased from a triennial average of 719 tonnes
in 1970-72 to 1014 tonnes in 1979-81 and further to 1854
tonnes in 1987-89, showing an increase at a compound rate of
3 per cent during the period(tab1e 5.9). The estimated
regression equation of the Netherlands' demand for imports
of Indian cashew shows an unsatisfactory goodness of fit as
is explained only to the extent of 37.06 per cent in terms
of R' (table 5.13).
However, the co-efficient with respect
to Gross Domestic Product is statistically significant at 1
Per Cent level and carries a positive sign as theoretically
expected; the value Is 0.8068. It implies that that the

country's imports of Indian cashew increased during the
period appears to have partially been actuated by the growth
in the country's Gross Domestic Product.
Germany accounted for about 2.4 per cent of the
world cashew imports in the triennium of 1970-72, 4.2 per
cent in 1979-81 and 3.9 per cent in 1987-89. The country's
cashew imports steadily mounted up from a triennial average
of 2.1 million kgs in 1970-72 to 2.9 million kgs in 1979-81
and further to 3.2 million kgs in 1987-89, showing an
overall growth at a compound rate of 1.81 per cent.
Bifurcating the entire period, it is visible that cashew
consumption in the country experienced a fast growth at a
compound rate of 3.61 per cent in the 70s against a moderate
growth at a compound rate of 1.92 per cent in the 80s.
Indian cashew enjoyed predominance in the German cashew
market except in the late 70s. Accordingly, the share of
Indian cashew in the country's total cashew imports declined
from 47.2 per cent in 1970-72 to 18.7 per cent in 1979-81;
then it soared to 65.9 per cent in 1987-89 (table 5.10).

CONSUUFTION PATTERN
The estimated regression equation with log
specification of the German demand for imports of cashew for
consumption shows moderate goodness of fit as is explained
only to the extent of 43.48 per cent in terms of fi2 (table
5.14) The elasticities with respect to cashew prices and
Gross Domestic Product are statistically significant but
only at 10 per cent level which carry a negative and a
positive sign as theoretically expectedj the value of the
former is 0.3769 and the latter 0.4062. And also, the
elasticity with respect to Time-trend is statistically
significant at 10 per cent level; the value is 0.2288. It
implies that the consumer's willingness to spend more on
cashew coupled with the chronological spread of cashew
eating habit amounted greater so much so that it could
overtake the downward pull of the negative price elasticity.
This appears to have partially effected an increase in the
country's cashew consumption at a compound rate of 1.77 per
cent during the period. The country's per capita cashew
consumption slightly increased from a triennial average of
0.03 kg in 1970-72 to 0.05 kg in 1979-81; it stood at 0.05
kg in 1987-89, too (table 5.17).

IYPORTS OP INDIAN CBSHEI
Germany's imports of Indian cashew nearly halved
from a triennial average of 1003 tonnes in 1970-72 to 557
tonnes in 1979-81 and then nearly doubled to 1857 tonnes in
1986-88, showing an increase at a compound rate of 1.09 per
cent during the period (table 5.10). Unfortunately, the
estimated regression equation with and without log
specifications of Germany's demand for imports of Indian
cashew show poor goodness of fit as are explained only to
the extent of terms of -8.01 per cent and 1.78 per cent in
terms of R'. Nor any variables considered here are
statistically significant.
MARKKT PROFILE
JAPAN
Japan accounted for about 2 per cent of the world
cashew imports in the triennium of 1970-72, 4.6 per cent in
1970-81 and 4.2 per cent in 1987-89. The country's cashew
imports mounted up from a triennial average of 1.8 million
kgs in 1970-72 to 3.2 million kgs in 1979-81 and further to
3.4 million kgs in 1987-89, showing an overall unsteady
growth at a compound rate of 1.42 per cent. Bifurcating the
entire period, it is noteworthy that cashew consumption in
the country registered a marvellous growth at a compound

ate of 14.87 per cent in the 70s against a normnl, rapid
growth at a compout~d rate of 5.04 per cent in the 80s.
India always enjoyed the lion's share in the Japanese cashew
market during the period.
The share of Indian cashew in the
total cashew imports of the country Slightly rose from a
triennial average of 68.4 per cent in 1970-72 to 68.5 per
cent in 1979-81 and then considerably to 93.9 per cent in
1987-89 (table 5.11).
WNSUYPTION PATTERN
The estimated regression equation with log
specification of-Japanese demand for imports of cashew for
consumption for the period, 1970-88, shows an unsatisfactory
goodness of fit as is explained only to the extent of 21.41
per cent in terms of R' (table 5.14). Yet, the elasticity
with respect to Time-trend is significant at 1 per cent
level; the value is 0.7424. It implies that the spread of
cashew eating habit in the country with respect to time
appears to have partially effected an increase in the
country's cashew consumption at a compound rate of 1.23 per
cent during the period.
The country's per capita cashew
consumption stood at around 0.03 kg through out the period
(table 5.17).

I m S OF INDIAN CASHEW
Japanese imports of Indian cashew rose unsteadily
from a triennial average of 1273 tonnes in 1970-72 to 2367
tonnes in 1979-81 and again to 3269 tonnes in 1987-89,
showing an increase at a compound rate of 2.85 per cent
during the period (table 5.11). The estimated regression
equation with log specification of the Japanese demand for
imports of Indian cashew shows an unsatisfactory goodness of
fit as is explained only to the extent of 28.26 per cent in
terms of R' (table 5.6). Yet the elasticities with respect
to Gross Domestic Product and Relative prices are
statistically slgnificant at 1 per cent level and 5 per cent
level respectively and carry a positive, sign; but the sign
of the latter is contrary to the theoretical expectations.
It indicates that India is left without a competitor in the
Japanese cashew market. Further, Japanese imports of Indian
cashew increased in response to the growth in the country's
Gross Domestic Product during the period.
WdUET PROFILE
AUSTRALIA
Australia accounted for about 2.6 per cent of the
world cashew imports in the triennium of 1970-72, 3.6 per
cent in 1979-81 and 2.8 per cent in 1987-89. The country's

cashew imports mounted up from a triennial average of 2.3
million kgs in 1970-72 to 3.6 million kgs in 1979-81; then
it declined to 2.3 million kgs in 1987-89, showing an
overall unsteady growth at a compound rate of 0.02 per cent.
Bifurcating the entire period, one can find that the cashew
consumption in the country experienced a rapid growth at a
compound rate of 4.06 per cent in the 70s against a slow
decline at a compound rate of 0.04 per cent in the 80s.
India apyears to have got the lion's share in the Australian
cashew market throughout the period. However, share of
Indian cashew in the total cashew imports of the country
declined from 51.1 per cent in 1970-72 to 17.5 per cent in
1979-81; then it rose to 83.8 per cent in 1087-89 (table
5.12).
COWSUMPTION PATTERN
The estimated regression equation with log
specification of Australian demand for imports of cashew for
consumption for the period 1970-88 shows an unsatisfactory
goodness of fit as is explained only to the extent of 18.51
per cent in terms of R~ (table 5.14). Yet, the elasticity
with respect to cashew prices and Time-trend are
statistically significant at 10 per cent level; the value of
the Pormer is -0.4468, whose sign agrees with the
theoretical expectation, and of the latter, 0.3016. It

implics that, one of the reasons for Liaving the country's
cashew consumption declined by a compound rate of 0.33 per
cent during the period appears to lie in the pull of the
rising cashew prices especially of the 80s which outdid the
push of the relatively less positive trend elasticity. The
country's per capita cashew consumption slightly rose from a
triennial average of 0.31 kg. in 1970-72 to 0.33 kg. in
1979-81; then it declined to 0.3 kg. in 1987-89 (table
5.17).
IYPORTS OF INDIAN CASUEW
Imports of Indian cashew into Australia fell from a
triennial average of 1353 tonnes in 1969-70 to 1971-72 to
1131 tonnes in 1978-79 to 1980-81; then it rose to 2296
tonnes in 1985-86 to 1987-88. Overall, it increased
unsteadily by a compound rate of 2.49 per cent during the
period (table 5.12). The estimated regression equation of
Australian demand for imports of Indian cashew shows a
moderate goodness of fit as is explained only to the extent
OP 33.87 per cent in terms n2 (table 5.15). Tt~e coefficient
with respect to relative price is statistically
significant at 5 per cent level and carries a negative sign
as theoretically expected; the value is 1.2552; the other
variables considered here are not statistically significant.
It indicates that Indian cashew in the Australian market is

vulnerable to competition in terms of price. Ilowever, the
~nnin reason for having the country's imports of Indian
cnshew increased during the period appears to have been
actuated by the fact that import of Indian cashew into the
country has been cheaper than any other cashew.
To conclude, cashew kernels got commercial
importance in the year 1920. Global cnshew nut production
as well as world cashew exports declined during the period
of the study. Cashew kernel prices in the New York Spot
Market increasingly fluctuated. There is a negative
relationship between international cashew prices vis-a-vis
world cashew nut production and global cashew exports vis-avis
international cashew prices. U.S.A., erstwhile
U.S.S.R., United Kingdom, Germany, Canada, Belgium,
Australia, the Netherlands, Japan, Sweden and New Zealand
were the major importers of cashew during the perlod.
Cashew consumption in U. 5. A , and Canada declined. Whereas,
cashew imports into United Kingdom, the Netherlands, Germany
increased considerably. Australian cashew market shows a
sign of stagnacy during the period. As a matter of fact,
Indian cashew lost its monopoly in the US and Canadian
market; while India maintained or increased its market share
in the British, the Netherlands', Japanese, Australian and
German cashew markets.

Table 5.1: lorld Production of Cashew nuts (Country Wise)
1970 to 1989
Total
Percentage to the total
Production
Year in million India Brazil Mozambi- Kenya Tanzakgs
que
nia
1970
1971
1972
1973
546.4
580.5
609.1
630.0
-----
37.9
37.4
37.3
36.5
3.7
3.4
3.6
5.9
33.7
34.8
32.8
32.1
1.8
2.6
3.6
2.4
21.4
20.7
21.3
21.4
1974
648.1
35.5
4.4
32.9
2.5
22.8
19'75
511.2
27.6
7.2
35.2
3.2
23.8
1976
402.9
36.5
9.1
23.6
6.9
20.6
1977
514.6
29.1
7.7
35.0
6.8
18.8
1978
408.9
36.7
18.8
14.9
8.8
16.8
1979
417.9
43.1
19.1
15.8
4.4
13.7
1980
457.0
39.4
16.4
20.8
3.3
9.0
1981
465.5
40.8
15.9
20.4
3.2
7.3
1982
458.4
42.5
17.4
13.3
9.7
9.7
1983
398.1
38.9
22.6
8.9
3.0
8.3
1984
464.3
47.7
15.9
4.4
2.6
10.1
1985
426.6
35.6
26.2
5.9
2.3
7.6
1986
437.9
27.4
36.3
6.9
2.0
4.4
1987
1988
398.3
434.0
1989 457.6
Source: F.A.O.
37.7
30.0
32.8 1
29.7
18.8
30.7
1
9.8
8.8 2.5
9.2 2.8
2.2 1
-----
Production Year Bmk, various issues
4.2
4.6
5.6
1

222
Table 5.2: World Exports of Cashew Kernels (Country wise) -
1970 to 1989
(in Million kgs)
Year India Brazil Mozam- Kenya Tanzania Total*
bique
-------
1970
1971
1872
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
54.1
(69.0)
60.0
(67.6)
64.5
(63.3)
57.0
(59.1)
58.0
(61.6)
59.2
(61.7)
55.9
(59.4)
40.1
(56.2)
23.8
(40.6)
37.4
(51.2)
31.8
(47.3)
33.7
(48.9)
31.8
(55.8)
36.5
(62.3)
30.6
(50.3)
40.6
(61.5)
39.5
(56.0)
38.6
(50.7)
32.1
(39.3)
43.9
(50.5)
6.5
(8.3 )
4.1
(4.6 )
7.2
(7.1 )
6.0
(6.2 )
7.6
(8.1 )
11.4
(11.9)
9.4
(10.0)
7.4
(10.4)
10.9
(18.6)
11.9
(16.3)
14.5
(21.6)
15.5
(22.5)
17.3
(30.3)
14.8
(25.3)
25.0
(41.1)
20.7
(31.3)
23.0
(32.6)
29.0
(38.1)
37.4
(45.8)
32.0
(36.8)
14.8
(18.9)
20.4
(23.0)
27.2
(26.7)
29.6
(30.7)
24.4
(25.9)
21.2
(22.1)
21.1
(22.4)
17.0
(23.8)
18.3
(31.2)
17.1
(23.4)
15.6
(23.2)
12.2
(17.7)
4.3
(7.5 )
2.9
(4.9 )
2.5
(4.1 )
2.3
(3.5 )
5.3
(7.5 )
6.1
(8.0 )
7.0
(8.6 )
5.5
(6.3 )
0.1
(0.1 )
0.2
(0.2 )
0.1
(0.1 )
0.2
(0.2 )
0.1
(0.1 )
0.2
(0.2 )
1.6
(1.7 )
3.0
(4.2 )
1.7
(2.9)
2.7
(3.7)
1.8
(2.7 )
1.9
(2.8)
1.6
(2.8 )
2.6
(4.4 )
2.0
(3.3 )
2.5
(3.7 )
2.7
(3.8 )
1.5
(2.0 )
3.2
(3.9 )
2.5
(2.9 )
2.9
(3.7 )
4.0
(4.5 )
2.9
(2.8 )
3.7
(3.8 )
4.1
(4.3 )
4.0
(4.1 )
6.1
(6.5 )
3.9
(5.4 )
3.7
(6.3)
3.9
(5.4)
3.5
(5.2 )
5.6
(8.1)
2.1
(3.6 )
1.8
(3.1 )
0.7
(1.2 )
Neg.
Neg.
0.9
(1.2 )
2.0
(2.4 )
3.0
(3.5 )
78.3
(100.0)
88.7
(100.0)
101.9
(100.0)
96.5
(100.0)
94.1
(100.0)
96.0
(100.0)
94.1
(100.0)
71.4
(100.0)
58.6
(100.0)
73.0
(100.0)
67.2
(100.0)
68.9
(100.0)
57.0
(100.0)
58.6
(100.0)
60.8
(100.0)
66.0
(100.0)
70.5
(100.0)
76.2
(100.0)
81.7
(100.0)
86.9
(100.0)
-------
* Excludes exports by China and others. Neg. : Negligible
Figures in brackets are percentage to the total
Source: The Cashew Export Promotion Council of India. Cochin.

Table 5.3: World Production, Exports and Prices of Cashew -
1970 to 89
Year
Cashew nut production
in million
Kgs (i)
Exports of cashew
kernels in
million Kgs (ii)
Price of W320
in cents per
pound (iii)
1970 564.4
1971 580.5
1972 609.1
1973 630.0
1974 648.1
1975 511.2
1976 402.9
1977 514.6
19 18 408.9
1979 417.9
1980 457.0
1981 465.5
1982 458.4
1983 398.1
1984 464.3
1985 426.6
1986 437.7
1987 398.3
1988 434.0
1989 457.6
78.3
74
88.7
73
101.9
74
96.5
101
94.1
116
96.0
112
I
94.1
71.4
213
lZ2
58.6
186
73.0
193
67.2
243
68.9
313
57.0
243
58.6
197
60.8
246
66.0
247
70.5
315
76.2
330
81.7
282
86.9 1 2 3 1 j
Source: (1) Column (i) F.A.O. Production Year Book, Various
Issues
(2) Column (ii) B (111): The Cashew Export Promotion
Council of India, Cochin.

Table 5.5: Direction of India's Casher Pprt8 - 1970-71 to 1986-69
Year
-
Total
Export1
in
Tomes
Canada
--
4.6
Percentage to the Total
U.K.
2.3
Australia
--
2.1
USSR
28.6
6.5
3.0
2.1
31.2
9.4
2.9
1.8
36.3
5.7
2.3
2.2
38.2
5.3
1.5
3.3
61.1
6.7
1.7
4.1
26.9
6.6
1.7
1.4
30.5
2.4
0.7
4.4
56.1
2.5
2.3
2.6
34.3
2.9
1.7
3.8
37.9
0.6
1.1
2.9
64.5
0.1
1.1
2.9
70.3
3.9
3.8
1.9
3.4
4.4
4.1
49.7
-
2.1
2.2
7.4
2.8
0.9
2.1
4.6
19.1
9.5
2.7
5.1
9.7
1.0
5.0
4.3
8.8
0.9
3.6
4.9
4.5
Source: Monthly Statistics of Foreign Trade of India, D[;CI & S, Calcutta.

Thlo 5.6; Ivrb or Mlor Kemls Inb U.S.8 - 1910 b 1PB9
(in Tonnes)
'anrania Kenya
-
1
896 111
(2.0 ) (0.3 )
893 131
1
(2.0 ) (0.3 )
1213 147
976 134
Total
Brazil Canada China Rep. of including
S.Rrrica other8
5438 113 - - 42942
(12.7) (0.3 ) (100.0)
3146 354 - - 44227
(7.1 ) (0.8 ) (100.0)
5931 838 - - 40486
(2.5 ) (0.3 ) (12.3) (1.7 ) (100.0)
5236 1 1500 - - 48977
(2.0 ) (0.3 ) (10.7) (3.9 ) 1 (100.0)
1974 14807 17205
5520 1382
(37.1) (43.2)
(13.8) (3.5 )
1975 17331 14777
9084 804
(39.7) (33.8)
(20.8) (1.0
1976 22410 1434
7868 742
(44*2) (28.2)
(15.5) (1.5 )
1977 10818 13918
5489 193
(31.2) (40.2)
(19.8) (0.5 )
1978 5518 12683
8652 171
(17.5) (40.3)
(27.5) (0.5
1979 12750 8734
8631 151
(37.0) (25.3)
(25.0) (0.4 )
1980 7781 8594
10557 63
(26.1) (Beg)
(35.5) (0.2 )
1981 4024 9306
11020 56
(14.5) (33.7)
(39.9) (0.2
1902 4798 12413
13562
(13.4) (34.9)
(38.1)
1983 20390 3960
15325
(46.9) (9.1 )
(35.3)
1984 19640 2123
11022
(51.8) (5.0 )
(29.1)
1985 21994 2294
20607 52
(44.7) (4.7 )
(41.5) (0.1 )
1986 22302 1315
18485 27
(49.6) (2.9 )
(41.1) (0.1
1987 23153 2753
12601
(56.3) (6.7 )
(30.8)
1988 N.R. N.R.
N.R. N.R.
1 1989 1 IS78 1 17" 1 ~~"7
1 7g5 1 - 413"
(38.6) (6.3 ) (4.1 ) (1.3 ) (42.4) (0.1 ) (1.9 ) (100.0)
N.R. - Not Rvailabls
'igures In brackata are percentage to the totel
Source: U.5. Tcade Publications and U.3 Owpartmsnt of Rgciculturs.

227
l&lo 5.7: Imarto of CRdw Kmmla Into Canada - 1970 to 1BY
(in Tonnsa)
1
1
Ysor
1970
1971
1972
1973
1974
1975
1976
1977
1970
1979
1900
1981
1982
1983
1984
1985
1986
1987
lodln
-
4703
(77.8)
1655
(71.4)
5070
(66.0)
4143
(61.8)
3720
(62.8)
2052
(42.3)
4457
(67.7)
1547
(34.6)
554
(13.6)
1313
(33.7)
525
(16.0)
81
( 3.1)
153
( 6.8)
1181
(36.5)
750
(22.2)
553
(17.0)
275
( 9.0)
420
(15.3)
N.i
1988
I
1 1989 1 N.U. 1 N.U.
b2sw
biqus
-
-
-
-
1078
(10.2)
715
(16.7)
109
( 4.7)
467
(10.4)
1161
(13.4)
614
(16.3)
254
(7.7)
84
( 3.4)
44
( 2.0)
16
( 0.5)
45
( 1.3)
14
( 0.4)
-
-
Tanrenia
N U
I
N.A. I N.a. 1 N.A. 1
".I - Not Available
Fl~ur~8 ln bradeta are percent40 to the total
Source: Canadian Trsde Publications.
-
-
-
369
( 6.3)
695
(14.3)
446
( 6.8)
174
( 3.9)
27
(0.7)
95
( 2.4)
289
(8.8)
299
(12.0)
-
7
( 0.2)
72
( 2.1)
-
-
-
Brsril
113
( 1.8)
8
( 0.2)
49
( 0.6)
59
( 0.9)
59
( 1.0)
291
( 6.0)
199
( 3.0)
340
( 7.6)
128
( 8.0)
227
( 7.1)
664
(19.3)
691
(27.8)
781
(35.0)
631
(19.5)
765
(22.6)
1318
(40.6)
1159
(57.6)
1216
(44.1)
N.i
Peopla'a
Republic
of China
-
-
-
-
3
679
(14.0)
474
( 7.2)
106
( 6.8)
87
(2.1)
95
( 2.4)
46
(1.4)
22
( 0.9)
18
( 0.8)
209
( 6.5)
107
( 3.2)
171
( 5.3)
52
( 1.7)
26
( 0.9)
N.i
U.5.U
205
( 3.3)
104
( 2.1)
328
( 1.7)
378
( 5.6)
614
(10.4)
410
( 8.4)
410
( 6.2)
413
( 9.2)
627
(15.4)
569
(14.6)
1199
(36.6)
961
(18.7)
1032
(46.1)
800
(24.8)
1139
(33.7)
773
(2J.8)
602
(19.7)
871
(31.6)
Ni.
NNiR
Kenya
-
-
-
-
5
-
86
( 1.1)
1008
(22.5)
903
(22.1)
801
(20.6)
149
(4.5)
104
( 4.2)
15
( 0.7)
19
( 0.6)
28
( 0.8)
176
( 5.4)
61
( 2.01
-
Neg.
1 1 1 1 3795
2
35
( 0.5)
59
( 1.3)
40
(1.0)
19
( 0.5)
40
-
-
-
-
-
-
(1.2)
(100.0)
- 1 6703 1
-
-
154
( 2.3)
7
( 0.2)
-
-
-
-
-
-
-
-
-
-
(100.0)
(100.0)
5925
(100.0)
4849
(100.0)
6583
(100.0)
4475
(100.0)
4077
(100.0)
1896
(100.0)
3276
(100.0)
2845
(100.0)
2216
(100.0)
1211
(100.0)
3178
(100.0)
1244
(100.0)
3051
(100.0)
2713
(100.0)
2586
1
I

Table 5.8: I.porta of Casber Kernels into U.K - 1970 to 1989
(in Tonnes)
Year
-
1970
19 71
1972
1973
1974
1975
1976
India
Mozambique
Kenya
Brazil
--
13 -
2 -
2 -
3 -
12
(0.5
N.A N.A
1 _ _ 1 _ _ _ l I I l 1 l l
N.A. - Not Available
Figures in brackets are percentage to the total
Source: High Bmnission of India, bndon.

229
Table 5.9: Iaporta of QLsbR Kernels into Netherlamb - 1970 to 1989
(in Tonnes)
Ycur
1870
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
llldia
612
(52.9)
655
(39.0)
891
(42.5)
1014
(38.8)
893
(36.6)
1328
(41.5)
1485
(40.2)
929
(33.1)
941
(31.7)
1331
(49.6)
1281
(36.5)
431
(15.8)
454
(15.2)
1114
(43.7)
946
(41.5)
790
(31.6)
1172
(50.7)
1734
(64.0)
1728
Tnnzunin
67
(5.8 )
67
(4.0 )
199
(9.5 )
415
(15.9)
584
(23.9)
552
(17.3)
540
(14.6)
684
(24.4)
521
(17.6)
363
(13.5)
826
(23.5)
643
(23.5)
1192
(39.8)
221
(8.7 )
134
(6.0 )
-
-
-
-
Mouunbique
-
-
-
-
892
(36.5)
1224
(38.3)
798
(21.6)
310
(11.0)
561
(18.9)
67
(2.5 )
662
(18.9)
367
(13.4)
482
(16.1)
241
(9.5 )
68
(3.0 )
38
(1.7 )
40
(1.8 )
31
(1.3 )
Kcnyn
Uruzil
China
--------
I
1 -
(56.6) (100.0)
1989 2089 - - 3055
(68.4)
-
N.A.
N.A.
N.A.
335
(11.9)
452
(15.2)
584
(21.9)
434
(12.4)
943
(34.5)
445
(14.8)
484
(16.6)
459
(20.5)
552
(24.9)
243
(10.7)
309
(12.5)
N.A.
12
(0.4 )
N.A.
N.A.
146
(4.9)
106
(4.0 )
176
(5.0)
199
(7.3)
283
(9.4)
241
(9.4 )
316
(14.1)
511
(23.1)
651
(28.6)
412
(16.6)
-
-
-
-
N.A.
24
(0.8 )
-
307
(10.9)
175
(5.9)
35
(1.3 )
41
(1.1)
ti9
(2.5)
16
(0.5)
12
(0.5 )
68
(3.0 )
118
(5.3 )
13
(0.5 )
18
(0.7 )
Total
includlllg
others
1156
(100.0)
1678
(100.0)
2094
(100.0)
2616
(100.0)
2411
(100.0)
3198
(100.0)
3697
(100.0)
2803
(100.0)
21167
(100.0)
2543
(100.0)
3474
(100.0)
2701
(100.0)
2959
(100.0)
2371
(100.0)
2240
(100.0)
2385
(100.0)
2218
(100.0)
2716
(100.0)
Figures in brackets are percentage to the total
Source: hbassy of India, the Hague.

Table 5.10: Iqorts of QstRl Kernels into Federal aeplblic of Gemy -
1970 to 1989
( 111 Tonnes)
Year
1970
1971
1972
1973
1974
1076
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
India
Mowunbique
907 555
(50.2) (30.7)
925 713
(43.9) (33.8)
1176 899
(47.4) (36.3)
1367 1102
(45.5) (36.7)
684 959
(28.8) (40.4)
860 9CO
(31.4) (33.3)
1355 547
(45.4) (18.3)
803 542
(28.7) (19.4)
347 866
(15.5) (38.7)
854 1040
(26.9) (32.7)
504 1410
(16.1) (45.2)
312 400
(13.0) (16.6)
394 1070
(13.8) (37.4)
694 787
(20.6) (23.4)
568 296
(30.1) (15.7)
948 265
(31.4)
1647
( 8.8)
200
(49.9) ( 6.0)
1914 307
(67.8) (10.9)
2011 612
(59.5) (18.1)
Tanzania
345
(19.1)
458
(21.7)
372
(15.0)
452
(15.0)
539
(22.7)
258
( 9.5)
274
( 9.2)
194
(6.9)
222
( 9.9)
253
( 8.0)
719
(23.0)
1114
(46.3)
R14
(28.4)
254
( 7.5)
85
( 4.5)
Kenya
China
-
256
( 9.5)
73
( 2.4)
832
(29.7)
459
(20.5)
670
(21.1)
135
(4.3)
48
(2.0)
71
( 2.5)
271
( 8.0)
415
(22.0)
572
(18.9)
411
(12.4)
149
'Total
including
others
--------
-
-
30
(1.3)
28
( 1.0)
67
( 2.2)
155
(5.5)
153
( 6.8)
176
( 5.5)
57
(2.0)
137
(5.7)
23
( 0.8)
147
( 4.4)
118
( 6.3)
195
(6.4 )
87
( 2.6)
68
Brazil
157
(6.6)
356
(13.2)
56
( 1.9)
111
(4.0)
112
( 5.0)
84
( 2.6)
233
(7.5)
290
(12.1)
345
(12.0)
1121
(33.3)
305
(16.2)
984
(32.6)
902
(27.3)
360
1807
(100.0)
2107
(100.0)
2479
(100.0)
3006
(100.0)
2372
(100.0)
2702
(100.0)
2985
(100.0)
2796
(100.0)
2239
(100.0)
3177
(100.0)
3121
(100.0)
2404
(100.0)
2863
(100.0)
3363
(22.00)
1884
(100.0)
3020
(100.0)
3302
(100.0)
2824
Figures in brackets are percentage to the total
Source: Consulate General of India, Frankfurt.
Tropical moduct Institute, London (1971, 1972).

Tlbls 5.11: Iqorts of Cashu K*RIo Into bpan - 1970 ta 19811
(lo Tonne.)
- 3 -
(65.3) ( 0.2)
(100.o)
- 4323
(77.5) ( 0.1) (10.2) ( 9.3) ( 0.31 (1uo.o)
- 6559
(100.0)
I91.0) (100.0)
(39.8) (12.1) (6.8) (16.91 (6.3) (6.3) (8.0) (1.3) (100.0)
'1982 1647 188 84 1 18 59 1 27 14 33 21%
1983 2457 47 27 83 290 53 11 2954
(83.1) (1,6) (0.9) (2.8) (9.8) (1.1) (0.6) (100.0)
1984 2076 20 - - 61 200 29 8 2394
(86.7) (0.8) (2.5) (8.3) (1.2) (0.3) (100.0)
1985 2128 11 - - 18 56 99 6 2348
(90.5) ( 0.5) ( 0.8) ( 3.7) ( 4.2) ( 0.3) (lOU.O)
1986 3027 56 - 29 40 250 8 3410
(80.8) (1.6)
Fi9urea in bracketa are percsntags to the total
SCurcs: Embassy or India, Tokyo.

(0.001) ( 9.1) ( L'L)
LPZC - 2s 55
(0'001) (9.5) (Z*V) (9.1)
9612 - EZL E6 OE
(o'oor) ( 2.21 (c'oz) ( 9.11
OLLZ 09 6VS EV
(0'001) ( C'Z) (Q'VL) ( 9'5) ( E'LI
VCEE - LL 081 881 Zt
(o.onr1 ( 1.2) ( 9.2) (8.91) ( 1.~1 ( 8.1)
(0.001) 1 ( 9.61 (9.52) ( c.5) ( 2.h) ( 6.z)
6061 EEL 601 ZOL i8 55
(0.001) ( 9'6) (9'Zl) (2'61) ( 6'1)
vv9c - - 6 VZ
(0'001)
6CVC -
(0'001) VOEZ - - I -
( E'V)
(0'0011 I
56EZ -
- L9L
(o,onr) ( 6.6)
- I -
1382 - - L9L
(5'11.1
- 96s
(Z.51)
291 ZSLL E8-1861
( C'S) (C'ZV)
021 L56 28-1861
(1.21) (9'8C)
SPE 0011 18-0861
( 1'6) (6'09)
LZZ 5LVL 08-6L61
( 8'9) (O'CV) OEL 618 6L-6~61 I
( ~'6) (S'5E)
VlE CVLL 81-LL6L
( S'LI (8'0~)
LEZ 9VZZ LL-9L61
(V'52) (6'89)
SZ6 ZLSZ 91-SL6L
(V'VC) (E'09)
(~'96) (L'BVI
01.-6861

e10 5.13: Rspnaalon Eq~Otims of Onand for Iqwrts or Cwlw for Conauptlon, Vulous
CpntrLa
Co-efficienta of
I
I
(1.30) (1.46) (1.12) (2.64)
Netherlands 105.15
/ Carmany
I
I
Figures in parentheses indicate the It' valuas
*' Significant at 5 per cent levsl
* Significant at 10 per cent level

Tabla 5.lb: Rqrwaeim Eqwtlm d Drnd for Iqort. d bahw for Cmawtfon, Variow
Cantrie8.
I 1 Unitsd Kingdom
I
1 Lermany
Japan
rlgures in parentheees indiceta the I t' values
*'* Slgniricant at 1 per cent level
** SlgniPicant at 5 psr cent level
Slgnlricant at 10 per csnt level

IlbL 5.15: R.pn.~irn EtpthU of D.md for Iqorte of Indin Ceshw, Varioua Countirsm
Co-efficient of
u.s.n.
Conode
(5.26) (3.63) (0.66)
United Klngdom
-1370.5
(6.23)
The Neth~rlande -42.190
1 (0,52)
Gsrmeny
138.410
(0.97)
-0.2076
(0.40)
0.5413
(1.00)
-1.0370
(0.67)
15.0712***
(0.50)
l.BM0-
(3.51)
0.3460
(1.51)
1.0883
0.3706
0.0178
44.720
6.299
1.163
2.1224
1.4256
0.5001
1970-89
197040 (
i
1970-88
Japan
-170.260 i.Bl5lt. 0.6189) 0.1709 / 1.687 1.1217 1970-00
(1.62) (1.61) (1.76)
Australia 344.420 -1552 0.9381 I 5609 10710 1970-00 1
(4.01) (2.76) (1.45) I
Figures In parentheses Indicate the It' veluse
** Signiflcant at 1 per cent level
" Significant at 5 per cent Lval
* Significant et 10 per cent level

lala 5.161 Rlpnulm Ewtlaw of h n d for Inports of Indlan Cashsu, Varlws Cwntlrll
Elaatlcity of
u.s.n.
I
Csnsda
Germany 8.995 -1.1763 -0.1719 -0.0101 0.312 0.1432 / 1970-08
Japan
Australia
Figuretl in parenthsaea indicate ths 't' values
* Significant at 1 par cent level
* Signillcant at 5 par cent level
* Significant at 10 par cent level

Table 5.17: Per Capita Cashew Consumption in Various Countries -
1970 to 1989
Japan
0.01
0.02
0.02
0.03
0.02
0.04
0.06
0.04
0.03
0.04
0.02
0.02
0.02
0.03
0.02
0.02
0.03
0.02
0.03
(in Kg.)
Australia
0.23
0.31
0.39
0.32
0.45
0.47
0.40
0.37
0.45
0.33
0.30
0.36
0.28
0.34
0.48
0.36
0.36 1
0.28
0.26
0.35
U.K.
0.03
0.04
0.06
0.06
0.06
0.04
0.07
0.05
0.04
0.05
0.04
0.04
0.06
0.05
0.05
0.05
0.06
0.06
0.07
0.09
Canada
0.13
0.27
0.35
0.30
0.25
0.22
0.29
0.19
0.17
0.16
0.14
0.10
0.09
0.13
0.14
0.13
0.12
0.11
0.13
0.14
Year
1970
1971
1972
1973
1974
1975
1976
1077
1078
1979
1980
1981
1982
1983
1084
1985
1986
1987
1988
1989
-
divided by
U.S.A.
0.21
0.21
0.23
0.23
0.19
0.19
0.23
0.15
0.14
0.15
0.13
0.12
0.15
0.18
0.24
0.20
0.18
0.17
0.15
0.17
the Population
Netherland
---------
0.41
0.57
0.07
0.85
0.76
1.01
0.99
0.86
0.91
0.80
1.03
0.78
0.86
0.74
0.62
0.68
0.65
0.71
0.93
0.88
-
Imports
-
as
-
Source:
Germany
0.03
0.03
0.04
0.05
0.04
0.04
0.05
0.04
0.04
0.05
0.05
0.04
0.05
0.06
0.03
0.05
0.05
0.05
0.06
-
Derived
-
of Cashew
-
0.05 I -
0.03
for Consumption

CWER 6
PRICE BBHAVIWR
This chapter reveals the mystery of the movement
of the international prices of tea, coffee and cashew
kernels since 1970 and can be a prelude to the Time Series
modeling.
OVERTURE
Instability in international commodity prices is a
matter of concern Lo exporters and importers ull over the
world. For example, the drastic changes in prices of
primary commodities between 1973 and 1975 attracted much
attention and particular concern, to such an extent that the
United Nations Conference pn Trade and Development (UNCTAD)
proposed an integrated programme on commodities (see UNCTAD
1974) to stabilise international prices of primary
1. The aggregate spot export price index (1970=100) of
primary commodities compiled by the International
Monetary Fund reached 212.1 in 1974 - its highest level
since 1957 - and then dropped to 174.1 in ,1975 (see
the Fund's monthly publication, International Financial
Statistics). The annual percentage changes in this
index during 1973, 1974 and 1975 were, respectively
54.7, 27.8 and -17.9.

The fact that the fluctuations in international
prices of primary commodities have been much more pronounced
than those in the international prices of the manufactured
goods, has often been elucidated on the ground that the
international primary commodity markets are more competitive
than the markets for manufacturers. This is so because, in
a competitive market, prices are more responsive than they
are in the monopolistic or oligopolistic markets. In fact,
in the latter, theoretical and empirical evidence has shown
that prices are, more often than not, determined by factors
that bear little, if any, relationship to short-run
variations in demand and supply.
In consequence, it is a well-known fact that the
primary commodity exporters in India took a keen interest in
trading with erstwhile U.S.S.R and East Europe within the
purview of the bilateral rupee payment agreement which
ensured them a stable price for quite a long period. Of
course, the country was losing hard currency. Further, the
consequent market diversion upon the country's expanded
trade with rupee payment areas helped increase the prices of
those commodities in which India has got a larger export
share, in the hard currency areas but to the advantage of
the other exporting countries, of course, the countries
competing with India in the world market.

Behaviour of the international prices of tea,
coffee and cashew kernel in particular is no different from
the behaviour of the primary commodity prices in general as
stated above. Tea prices in the London Spot Market and
coffee and cashew kernel prices in the New York Spot Markets
seem to have fluctuated widely and erratically during the
period of the study, leaving a sort of uncertainty and a
sense of insecurity in the concerned industries in the
exporting countries and among the traders and consumers in
the importing countries. Against this background, a study
of the Information - Efficiency of the international spot
markets of these three commodities is of much importance and
of usefulness.
The view of the market efficiency employed in this
study, denoted by Tohin (1984)' generally as Information -
Arbitrage Efficiency, is that which dominates the finance
and rational expectations literature. This predicts that if
a market is efficient, on average it is impossible to make
trading gains using publicly available information, i.e. at
any moment in time, securities or future prices fully
2. J. Tobin, On the Efficiency of the Financial System,
Lloyds Bank Review, (1984) (April); 1-15.

eflect publicly available information.
market forces solely determine the prices.
It implies that
As Fama (1970)~ has shown, the hypothesis of
efficiency needs to be more specific to be empirically
testable. It has been normal to assume that market
equilibrium can be expressed in terms of expected returns on
assets such as futures contracts, various models of expected
returns having been adopted in the literature. Commonly, it
is assumed (e.g., Fama) that any expectation of excess
returns XE+l, conditional on the information It reflected in
the current prices, is equal to zero.
where XE,l, a random variable, It defined as a difference
between observed price and expected price at time t.
Consequently, a sequence of returns are a fair game' with
respect to a sequence of information. Expression (1) could
be described as an arbitrage condition because any
unexploited profit opportunities would be perceived by
informed traders.
3. Fama, E.F., Efficient Capital Markets: A review of
theory and empirical work, Journal of Finance, (1970),
Vol 25(2), pp.383-417.

Given this somewhat more precise model of
efficiency, various types of information - arbitrage
efficiency have been distinguished, all of which define
different tests for market efficiency. These are the
familiar triology of weak-form, semi-strong form and strongform
tests as summarised by Fama.
(i) leak-forr Efficiency: This proposition is often
referred to as the Random Walk hypothesis which implies that
successive commodity prices are not statistically
associated. The empirical evidence suggest that successive
price changes are random as the correlation between them are
virtually zero.
(ii) Semi-strong form: This testable proposition
implies that commodity prices adjust fully and
instantaneously to new publicly available information.
(iii) Strong-form Efficiency: This third testable
proposition is that no trader can, through superior analysis
of publicly available information or through access to nonpublicly
available information, predict future prices.
The present study is concerned with Weak-form
Efficiency, which occurs when traders cannot make prediction
using a trading rule based upon a time-series of prices.

While the general 'fair game' model outlined says
nothing about the nature of the process generating expected
returns, tests for Weak-form Efficiency have been based on
the so-called Random Walk model, a special extension of the
fair game' model based on a specific stochastic model of
the process generating expected returns.
A priori one mlght argue that the expected value
of any futures price Pt will be conditional upon past
realised prices Pt-l, Pt-2, ... Pt+, where each is a random
variable
pt will be a martingale4 series if the function,
Expression (3) states that the expected value of futures
price, based upon the information set pt-,,
is equal to the
4. William Feller (1966) defined a martingale process as a
mathematical process in which the conditional
expectations of the ntlst value equals the nth value in
the sane set of data. A martigale is also a "fair
game".

last period price pt-l. Granges and Morgenstern (1970)~
indicate such a martigale will obey the model
where pt, pt-l are defined and Et is a residual series, with
E(Et) = 0 and Cov(Et, EtWs) = 0, s + 0.
a so-called second-order martingale.
Expression (4) 1s
If further
restrictions are placed on the residual series Et, other
models can be defined. For example as Cooper (1982)~ notes,
for expression (4) to be a strict Random Walk, the residual
series Et would not only have to be uncorrelated but also
independent. Of course, a strict Random Walk Model follows
the first order autoregressive process, but the condition
that
the autoregressive coefficient (6) lies within the
unit circle is clearly violated and the first difference
(E ) follows 'white-noise'. Hence, a random walk model is
t
Autoregressive integrated moving average to the order of
(o,~,o)~. On the basis of the above discussion, here we are
assuming martingales as a reasonable approximation in weak
5. C.W.J. Granger and 0. Morgenstern, Predictability of
Stock Prices, Massachusetts: Heath Lexington. 1970.
6. J.C.B. Cooper, World Stock Markets: Some Random Walk
Tests, Applied Economics, (1982) Vo1.14 N0.5, pp.515-
553.
7. See, A.C. Harvey, Time Series Model, Heritage
Publishers, New Delhi, 1984, pp.165-6.

lorm elf iciency. To test this hyptl~esls, autocorrelations
in the first-differenced price series have been used.
London Spot Market for tea and the New York Spot
Market for coffee and cashew kernels have been taken for the
analysis. Monthly average aggregate prices of tea in pence,
monthly average prices of coffee (Other Milds) in U.S cents
and monthly average cashew kernel prices (320 yrade) in U.S
cents have been selected.' Sample periods for tea and
coffee are uniform, from January 1970 to December 1992 but
for cashew kernel, it is from January 1970 to December
1988.' Since the hypothesis expressed in expression (4) is
in terms of price changes, the absolute price series were
converted into the first-differenced series to the form
8. Tea prices, coffee prices and cashew prices were
compiled, respectively, from International Tea
Committee's Annual Bulletin of Statistics,
International Coffee Organisation and Mitchel Beck Co.
Inc., New York.
9. Monthly average cashew prices are not available from
1988 onwards from the same source - Mitchel Beck Co.
Inc., New York. Hence, the sample period in case of
cashew price is shortened.

pt-pt-l - Et.
auto correlation^^^ within 24 lags were
estimated in the first differenced series. In order to test
whether the autocorrelation function over twenty four lags
exhibit a 'white-noise' process, the Box-Pierce statistic
wns also calculated.
follows:
Thls statistic is formulated as
where r are the estimated autocorrelation coefficients, k is
a given lag and K the total number of lags. If the data do
follow a 'white-noise' process, then Q will be
asymptotically x2, with k degrees of freedom. For
comparable tests, an upper limit of k = 24 was used,
although as Harvey (1981a) points out, the choice of k is
somewhat arbitrary.
RESULTS
The table 6.1 gives the autocorrelation co-
efficients within the limit of 24 lags in the first-
10. An estimate of Autocorrelation function would be given
as

differenced series of tea, coffee and cashew kernel prices.
lhile the original price series appeared non-stationary,''
the first-differencing of them made them stationary since
the estimated autocorrelation coefficients in them do not
exhibit any form of trend.
From the table 6.1, it is visible that first,
fifth, seventh, eleventh, sixteenth and seventeenth order
autocorrelation co-efficients in tea price series, first and
fifteenth order autocorrelation co-efficient6 in coffee
price series and fifteenth order autocorrelation coefficient
in the cashew price series are significantly
different from zero at 5 per cent significance level. The
computed Q values are statistically significant at 5 per
cent level only in case of tea prices and coffee prices (it
is not significant in case of cashew prices). Thus, the
results do indicate the presence of some Weak-form
Inefficiency in London tea market and New York coffee market
but not in the New York cashew market. Hence, the study
rejects the hypothesis that international tea and coffee
prices are generated by Handom Walk Process. At the same
time, it accepts the hypothesis that international cashew
11. A series is said to be stationary if there is no
evidence of a change in the mean over time. The ARIMA
(0,0,0) series has a mean that varies over time. The
(0,1,0) series is one that is stationary in the mean.

prices are generated by Random Walk Process over the sample
period. It implies that short-run forecasting of tea and
coffee prices can be made from the past prices through an
appropriate Autoregressive Modeling; but it is not possible
incase of cashew kernel prices.

Table 6.1 Aub-mrmlation coefficients of First-differenced
Price Series pt - pt-l= E (24 lags)
Tea
Coffee
Cashew kernels
1
0.20318**
(3.29)
0.34362**
(5.57)
-0.08304
(1.25)
i
4
2
0.3512
(0.55)
0.04891
(0.76)
-0.03996
(0.62)
0.12808
(1.87)
-0.00543
(0.08)
-0.08100
(1.17)
0.00140
(0.02)
0.08319
(0.80)
-0.07782
(1.17)
5
-0.19451**
(3.02)
-0.10631
(1.52)
0.01410
(0.21)
6
-0.12427
(1.86)
-0.13715
(1 -95)
0.12236
(1.85)
7
-0.18403**
(2.72)
-0.05328
(0.75)
-0.01882
(0.28)
8
-0.05176
(0.75)
0.06510
(0.91)
-0.02064
(0.31)
9
0.07764
(1.12)
0.11641
(1.62)
-0.05988
(0.91)
10
0.04542
(0.65)
0.06882
(0.95)
-0.01617
(0.24)
11
0.15728**
(2.25)
-0.03197
(0.44)
-0.00330
(0.05)
12
0.13823
(1.94)
-0.09042
(1.24)
-0.01013
(0.15)
13
0.00842
(0.12)
I
-0.10227
(1.40)
I
0.04369
(0.66)
I

Lags
Tea
Coffee
Cashew kernels
14
0.01644
(0.23)
-0.11435
(1.55)
-0.04000
(0.60)
15
0.01346
(0.19)
-0.20359**
(2.73)
-0.14700**
(2.23)
16
-0.23305**
(3.22)
-0.14208
(1.86)
0.04697
(0.71)
17 I
-0.16161**
(2.15)
-0.04073
(0.53)
0.00017
(0.003)
18
-0.13844
(1.81)
0.03630
(0.47)
-0.10877
(1.64)
19
-0.07716
(1.00)
0.08308
(1.07)
0.06742
(1.01)
20
-0.04784
(0.62)
-0.00230
(0.03)
-0,01835
(0.28)
21
0.03953
(0.51)
-0.06758
(0.87)
-0.10379
(1.56)
22
23
0.04660
(0.60)
0.08232
(1.06)
-0.07699
(0.98)
-0.12664
(1.61)
I
-0.07091
(1.07)
-0.02896
(0.43)
24
0.10577
(1.35)
-0.09533
(1.20)
0.03042
(0.46)
Q
83.72*
(36.42)
88.48*
(36.42)
22.09
(36.42)
** Significant at 5 per cent level, t values are given in
parenthesis.
* Sjpificant at 5 per cent level the critical value of
X is given in parenthesis, kor k = 24 (Degree of
Freedom)

CHAPTER 7
SUWY AND WLICY INPLICATIONB
This chapter presents an epitome of the previous
six chapters and the policy implications thereof.
Agricultural exports have an important role to
play in the economic development of a developing country
like India. According to the basic economic theory, export
performance of a country is mainly influenced, on the supply
side, by relative prices (ratio of export prices to domestic
prices), internal consumption and the domestic export
policies and, on the demand side, by relative prices (ratio
of the country's export prices to the competitors' prices in
the international market), real income, the size of, and
growth in, population, the prices of the substitutes,
exchange rates, growth in the world demand, the behaviour of
the international commodity prices and a number of non-price
factors such as designing, quality, marketing, etc.
The present study is an attempt to explore three
problems stated below:

(i)
Why did India's tea exports stagnate when the
country's tea production and the world tea exports
increased during the period, 1970-897
(ii) What did actually influence on an increase in India's
coffee exports during the period, 1970-897
(iii) What did necessarily make India's cashew kernel
exports to decline during the period, 1970-897
The present study, having put these three
propositions to test by the appropriate export supply
functions, concluded that changes in India's tea, coffee and
cashew kernel exports were largely influenced by the demand
factors. Accordingly, the study is to deal with the world
economic problems relating to India's tea, coffee and
cashew kernel exports with the specific objectives of :(i)
analysing the select segments of the world market to which
India exports these three commodities and (ii) studying the
behaviour of the prices of tea, coffee and cashew kernels
in the respective, important international spot markets.
The study is generally limited to the epochal
twenty year period of 1970-89. Relevant data and literature
were collected from the authentic sources. For the purpose
of analysing the data, trend equations in the form of

egression with log specification, simple linear regression
equations, the multiple linear regression models with and
without log specifications and the autocorrelation
techniques were used. The scope of the study is defined.
The study suffer from three identified limitations. The
entire study is divided into seven chapters, viz (i)
Introduction (ii) India's Foreign Trade - an overview (iii)
The world Tea market (iv) The world Coffee market (v) The
world cashew market (vi) Price behaviour and (vii) Summary
and policy implications.
MIIIA'S POUEICN TRADE-AN
OVERVIER
India's export earnings registered a commendable
growth over the period, 1970-71 to 1989-90, the rate of
growth experienced in the 70s was the fastest one. Except
in the fiscal years 1972-73 and 1976-77, the country's
import bill always outstripped the export earnings during
the period and thus export-import ratio registered a
decline.
The country's foreign exchange reserve grew fastly
in the second half of the 70s compared to the first half;
coming to the 80s, it appeared to have stagnated.
A micro-analysis of the country's exports revealed
that trends in the export earnings from the individual items

during the period were more complex compared to those in the
past two decades of 50s and 60s. Further, changes in the
composition of India's exports were to the advantage of the
non-traditional manufactured items. The shares of tea and
Jute manufactures, the two important items in the country's
exports, declined dramatically during the period.
India's exports lagged behind the world trade
during the period: because world trade expanded
considerably. Growth in world exports was largely actuated,
in the 70s, by high income oil producing countries and, in
the 806, by non-oil developing countries.
There were directional changes in the country's
exports during the period, 1977-78 to 1988-89. As a result,
exports into U.S.A., Japan, E.E.C., (excluding U.K.), East
European countries increased; while exports into U.K., ESCAP
and ECFNA decreased.
Although India's import bill registered only a
moderate growth in the 80s against a fast growth in the 70s,
the rate at which it increased over the entire period is
note-worthy. Because, such a trend was mainly actuated by
the rise in the import unit value. A micro-level analysis
revealed that petroleum and petroleum products were the
largest single item in the country's imports. That most of

the items in the country's imports experienced erratic
changes over the period can be attributed to the timely
imports made in accordance with the need of the economy.
However, imports of pearls, precious and semi-precious
stones were made in response to the demand for Indian
Jewellery in abroad.
India's Terms of Trade generally experienced
deterioration during the period. The country's Import-
Biased Foreign Trade Multiplier appeared to have adversely
affected the economy because the Import-GDP ratio, more
offer than not, happened to outdo Export-GDP ratio, during
the period.
Though tea drinking prevailed in China some five
thousand years hack, it became a habit in England only by
the dawn of the seventeenth century. The first exportation
of Indian tea took place in the year 1939. During the two
world wars, tea industry in India prospered. Yet, the
industry faced unprecedented depression for nearly two
decades since 1055.
India is the largest producer of tea in the world.
Other main producing countries are Sri Lanka, Indonesia,

Japan, Kenya, Malawi, Taiwan and Bangaladesh. India
accounted for the largest share in the world tea exports,
followed by Sri Lanka. Apart from the pristine competitor
(Sri Lanka), the countries like Kenya and Indonesia have now
emerged as entrants against India in the world market. Tea
prices in the London Spot Market which appear to have
fluctuated widely and erratically, are positively correlated
with the global tea production and the world tea exports.
There have been persistent market diversions from the
traditional tea drinking area of western Europe and North
America to the developing countries of Asia and erstwhile
U.S.S.R. during the period.
United Kingdom is the largest importer as well as
the second largest re-exporter of tea in the world. The
country imported tea mainly from India, Sri Lanka,
Indonesia, China, Kenya, Mozambique and Tanzania. Though
Indian tea had got the largest share in the British Market
in the early 708, it was Kenyan tea which prevailed over
Indian tea in the late 80s. That tea consumption in the
country declined during the period was mainly due to the
shift in the consumers' preferences or habits. According to
U.K tea council, the inconvenience in preparing tea in
relation to instant coffee appears to be the important
reason for the shift in the consumers' preference which was

once tor tea drinking. Further, that the country's imports
of Indian tea declined during the period is attributed to
the lack of competitiveness of Indian tea in terms of price.
U.S.A is the second largest importer of tea in the
world. The country imported tea mainly from India, Sri
Lanka, Indonesia, China, Taiwan, Japan, Kenya, Argentina and
Brazil. Although Indian tea had got the third largest share
in the US market in the early 70s, it was lowered to the
seventh place in the late 80s. Tea consumption in the
country increased during the period. According to U.S.
Department of Agriculture, since 80 per cent of the U.S tea
consumption is as iced tea, efforts to expand usage have
been difficult as sales of soft drinks, fruit juices and
alcoholic beverages are in direct competition with tea in
cold beverage market. Further that U.S imports of Indian
tea declined during the period is explained in terms of the
country's preference for importing tea from nearby Latin
American countries.
Canada, imported tea mainly from India, Sri Lanka,
Indonesia, China and Kenya. Although Indian tea had enjoyed
the second largest share in the Canadian Market in the early
706, it was lowered to the fourth place in the late 80s.
That tea consumption in the country declined during the
period is explained in terms of the reduction in the

consumers' spending on tea drinking coupled with the habit
of interchanging tea and coffee. Further, that the
country's imports of Indian tea declined steeply during the
period is attributed to the lack of competitiveness of
Indian tea in terms of price coupled with the country's
preference for importing other teas.
Ireland imported tea mainly from India, Indonesia,
China and Kenya. Although Indian tea had got the largest
share in the Ireland's market in the early 70s, it was
Kenyan tea which prevailed in the late 80s. That tea
consumption in the country decreased during the period is
partially explained in terms of the shift in the consumer's
preferences or habits to some other beverages except coffee.
Further, that the country's imports of Indian tea declined
during the period is attributed to the lack of
competitiveness of Indian tea in terms of price.
The Netherlands is the largest entrepot centre for
tea in the world. The country imported tea mainly from
India, Sri Lanka, Indonesia and East Africa. Around 40 per
cent of the imported tea was re-exported from the country.
Indian tea which had enjoyed the largest share in the
Netherlands' tea market in the early 70s, was lowered to
the fifth place in the late 80s. That the tea consumption
in the country increased during the period is attributed to

the advancement of tea drinking habit in the country.
Further, that the country's imports of Indian tea declined
during the period is attributed to the lack of
competitiveness of Indian tea in terms of price coupled with
the country's keen interest in buying other teas.
Germany imported tea mainly from India, Sri Lunka,
Indonesia, China and Kenya. Indian tea has got the largest
share in the German Market throughout the period. That tea
consumption in the country increased during the period is
explained in terms of the consumers' increased spending on
tea as it being an essential beverage. Further, that the
country's imports of Indian tea increased during the period
is attributed to the country's preference for Indian tea
over other teas.
France imported tea mainly from India, Sri Lanka,
China and Indonesia. Indian tea has enjoyed the third
largest share in the French Market throughout the period.
That the tea consumption in the country showed a steep
upward trend during the period is explained in terms of the
consumers' augmented spending on tea drinking. Further,
that the country's imports of Indian tea declined during the
period is attributed to the lack of competitiveness of
Indian tea in terms of price.

Though Japan domestlcally produce a sizable
quantity of tea, it imports the same to meet the pressure of
the internal demand. That the country's domestic tea
production experienced a slow-moving decline during the
period appears to have activated an increase in her tea
imports especially in the 80s. The country imported tea
mainly from India, Sri Lanka, China and United Kingdom.
Indian tea has enjoyed the fourth largest share in the
Japanese Market throughout the period. That the country ' s
total tea imports as well as imports from India increased
during the period is explained in terms of the country's
need to maintain the past level of tea drinking.
Australia imported tea mainly from India, Sri
Lanka, Indonesia, Paupa New Guinea and Chino. Although
Indian tea had got the third largest share in the Australian
Market in the early 70s, it was lowered to the fifth place
in the late 80s. That the country's tea consumption
decreased during the period is explalned in terms of the
shift in the consumers preferences or habits. Further, that
the country's tea imports from India declined during the
period is attributed to the lack of competitiveness of
Indian tea in terms of price.
New Zealand imported tea mainly from India, Sri
Lanka, Indonesia and China. Although Indian tea bad enjoyed

the third largest share in the New Zealand's market in the
early 70s, it was lowered to the fifth place in the late
80s. That the tea consumption in the country decreased
during the period is largely explained in terms of the
shift in the consumers preferences or habits.
Unfortunately, that the country's import of tea from India
declined during the period is not explained by the fitted
regression models.
Saudi Arabia imported tea mainly from India, Sri
Lanka and United Kingdom. Indian tea has got the second
largest share in the Saudi Market through out the period.
That the tea consumption in the country increased swiftly
during the period is explained in terms of the spread of tea
drinking habit in the country. Further, that the country's
tea imports from India increased during the period is
attributed to the absence of competition consequent upon the
expanding tea consumption.
Although the inmates of the shehodet monastery in
Yemen first to have tasted coffee in the early years of 15th
century, coffee drinking became a habit in Europe only in
the 17th century. In consequence, the first coffee house
was set up in London in the year 1952. Two world wars and

the frequent over-production of coffee in Brazil disrupted
the world coffee nvlrket so much so that international coffee
prices fluctuated unprecedently and unpredictably. However,
coffee industry in India was ever expanding, particularly it
registered a phenomenal progress during the period, 1940-70.
World coffee production registered a steady growth
during the period. Brazil and Columbia are, respectively,
the first and the second largest producer 01 coffee in the
world. India has got the seventh place. World coffee
exports registered a moderate growth during the period.
Naturally, Brazil and Columbia shared first and second place
respectively in the world coffee exports. India is the
twelfth largest coffee exporting country in the world.
International coffee prices fluctuated widely during the
period. That the changes in the New York Spot Market prices
do not exhibit any kind of relation with world coffee
production and with world coffee exports is largely
attributed to the frequent market interventions exercised by
the International Coffee Organisation.
According to the trade nomenclature, there are
four types of coffee, viz. (1) Columbian Milds, (ii) Other
Milds (iii) Brazilian and Other Milds and (iv) Robusta.
Indian coffee is grouped under Other Milds.

The thirteen export markets for coffee, under the
present study, together accounted for around 80 per cent of
the global coffee imports.
U.S.A is the largest export market for coffee.
The country prefers to consume more of Other Milds in which
Indian Coffee is grouped. That the coffee consumption in
the country declined slightly during the period is partly
explained in terms of the unprecedented rise in the coffee
prices after the mid 70s. The surveys conducted by I.C.0
revealed that coffee cups among all the age groups of either
sex declined during the period. Further, people take more
cups of coffee with breakfast and naturally at home.
United kingdom prefers to consume more Robusta.
The country imports Indian coffee also. That the coffee
consumption in the country increased moderately during the
period is largely explained in terms of the spread of the
coffee drinking habit in the country, of course, at the cost
of tea.
India exports coffee to Australia. That the
coffee consumption in the country increased during the
period is attributed to the advancement of coffee drinking
habit.

Lion's share of coffee imported into Belgium is
through entrepot trade.
Yet, the country imports some of
the Indian coffee directly. That the coffee consumption in
the country increased fastly during the period is largely
explained in terms of the spread of coffee drinking habit.
Indian coffee too.
Canada favours more of Other Milds, of course,
That the coffee consumption in the
country increased moderately during the period is largely
explained in terms of the fall in the international coffee
prices since the mid 80s.
France prefers to consume more of Robusta.
country imports Indian coffee also.
The
That the coffee
consu~~~ption in the country increased steadily during the
period is largely explained in terms of the essentiality of
coffee as a beverage.
Germany favours Other Milds, of course, Indian
coffee too. That the coffee consumption in the country
increased rapidly during the period is largely attributed to
that the consumers spent more on coffee drinking out of
their augmented per capita real income.
Italy prefers to consume more of Robusta. The
country. imports Indian coffee also. That the coffee
consumption in the country increased during the period is

largely explained in terms of the spread of coffee drinking
habit.
All four coffee groups have got equal shares in
the Japanese Coffee Market. The country imports a sizeable
quantity of Indian coffee. That the coffee consumption in
the country increased during the period is largely explnined
in terms the advancement of coffee drinking habit.
The Netherlands prefer to consume more of superior
Columbian Milds. The country imports coffee from India
also. That coffee consumption in the country increased
during the period is explained largely in terms of the
spread of coffee drinking habit and partly in terms of the
consumers' preference for coffee over tea.
India exports a sizeable quantity of coffee to
Spain. That the coffee consumption in the country increased
rnpidly during the period is largely nttributed to the
spread of coffee drinking habit.
Sweden prefers to consume more of Brazilian and
Other Arabicas. The country imports coffee from India also.
That the coffee consumption in the country declined
moderately during the period is explained in terms of the
pull of the unprecedented rise in the international coffee
Prices after the mid 70s.

Switzerland favours more of Other Milds, and
naturally, Indian coffee. That the coffee consumption in
the country declined slowly during the period is partly
attributed to the rise in the international colfec yrlces,
particularly after the mid 70s.
ME IORll) CASHEW URKFP
Although cashew got inte~.national commercial
importance in the year 1920, world trade in cashew could
expand only by the year 1939 with the introduction of vacuum
packaging method that solved the infestation problem during
the voyage. During the period of World War 11, cashew
industry in India as well as world trade in cashew grew
dramatically.
World cashew nut production showed a wavering
decline during the period. The major cashew producing
countries are India, Brazil, Mozambique, Tanzania and Kenya.
In consequence, world cashew exports registered an unsteady
decline during the period. India is the largest cashew
exporter in the world, followed, at present, by Brazil. The
cashew prices in the New York Spot Market escalated with
wide fluctuations during the period. It is observed that
cashew prices in the New York Spot Market is inversely

elated to the world cashew production and to the global
cashew exports.
The seven cashew importing countries under the
present study altogether accounted for around 69 per cent of
the world cashew imports.
U.S.A is the largest export market for cashew in
the world. The country imported cashew mainly from India,
Brazil, Mozambique and Kenya. That the cashew consumption
in the country decreased during the period is partially
explained in terms of the rise in the cashew prices in the
international market. Further, that the country's imports
of Indian cashew declined rapidly during the period is
attributed largely to the lack of competitiveness of Indian
cashew in terms of price and partly to the country's
preference to import cashew from nearby Brazil.
Canada imported cashew mainly from India nnd
Brazil and from U.S.A. through entrepot trade.
That the
cashew consumption in the country declined during the period
is largely explained in terms of the unprecedented rise in
the international cashew prices after the mid 70s and partly
in terms of the reduction in the consumers' spending on
cashew. Further, that the country's imports of Indian
cashew decreased during the period is attributed largely to

the lack of comp%titiveness of Indian cashew in terms of
price and partly to the country's preference to buy from
Brazil.
United Kingdom imported cashew mainly from India.
That cashew consumption in the country increased rapidly
during the period is explained in terms of the spread of
cashew eating habit. Further, that the country's imports of
Indinn cashew augmented during the period 1s attributed to
the consumers' enlarged spending on cashew consequent upon
the spread of cashew eating habit.
The Netherlands import cashew mainly from India.
That the cashew consumption in the country increased during
the period is largely explained in terms of the consumer's
willingness to spend more on cashew coupled with the
chronological ndvancement in cashew consumption in the
country. Further, that the country's imports of Indlan
cashew augmented during the period was in response to the
growth in the country's Gross Domestic Product.
German cashew market is predominant of Indian
cashew. That the cashew consumption in the country
increased during the period is partially explained in terms
of the consumers' willingness to spend more on cashew
coupled with the advancement in cashew eating habit.

Unfortunately, the estimated regression models failed to
explain the growth in Germany's imports of Indian cashew.
Japan imported cashew mainly from India. That the
cashew consumption in the country increased during the
period is partially explained in terms of the spread of
cashew eating habit. Further, that the country's imports of
Indian cashew increased during the period is attributed to
the absence of competition in the Japanese Market coupled
with the country's ability to buy more cashew out of the
country's augmented Gross Domestic Product.
Australia imported cashew mainly from India. That
the cashew consumption in the country registered a slow
decline during the period, 1970-88 is partially explained in
terms of the pull of the rising cashew prices, further, the
country's imports of Indian cashew registered an unsteady
growth during the period is attributed to that the Indian
cashew is cheaper than any other cashew in Australian
Market.
Instability in the international commodity prices
is undesirable that it retards global trade. It is often
pronounced that international prices of the primary

comnodities are more unstable than those of the manufactured
goods. The behaviour of the international prices of tea,
coffee and cashew kernels in particular is no different from
the behaviour of the primary commodity prices in general.
Of course, the present study aimed at testing the
Information - Arbitrage Efficiency of London Spot Market for
tea nnd New York Spot Market for coffee and cashew kernels.
As Famn summarlsed, there are three types of testable
proposition of information efficiency of a market. They are
(i) Weak-form, (ii) Semi-strong form and (iii) Strong-form.
The study is concerned with Weak-form Test of Market
Efficiency which is based on the so-called Random Walk
Process.
Concerned data were compiled from the authentic
sources and processed for the purpose of the study.
Autocorrelation coefficients within 24 lags and Q-statistic
were estimated.
The results reject the hypothesis that tea prices
in the London Spot Market and coffee prices in the New York
Spot Market are generated by Random Walk Process, indicating
the presence of some Weak-form Inefficiency. At the same
time, the study confirms that the New York Spot Market for
cashew is informationally efficient.

POLICY IYPLICATIOWS
But for India's major trade partner, U.S.S.H,
disintegrated and, in consequence, the newly emerged
independent states inherited shattered economies, the recent
drastic devaluation of Indian rupee against major
currencies, followed by the partial convertibility
nnnouoced in the budget for the year 1992-93 should tiave
helped improve India's export performance. The fact that
the Indian exporters who were complncent to trade with East
Europe within the purview of bilateral trade protocol and
the rupee trade agreement, are placed in a predicament in
the changed World Economic Order is largely due to their
inability to diversify their commodity exports to the
traditional as well as to the non-traditional export markets
in the hard currency areas within a short period; because,
competitors have already established their feet in these
markets. In particular, India's trade with the present
common-wealth of Independent states (CIS) in tea, coffee and
cashew kernel is no different from what is in general.
According to the Research Bureau of Economic Times,
Calcutta, "The U.S.S.R was buying over 100 million kgs of
tea a year, on an average. It cut down its buying from late
1991 and almost vanished from the market by early 1992.
During the whole of 1992, it bought only about 42 million

kgs of Indian tea. This led to a demand and supply
imbalance and the prices in the domestic market tumbled.
The situation was equally worse in international price front
also. In London auctions, the average price of Indian tea
declined for the second year in running - from 114.8 pence
per kg in 1989 to 142 pence in 1990 and further to 132 pence
in 1991'. The chairman of Coffee Board of India stated,
"the earlier dependence of India on erstwhile Soviet Union
has come down considerably. As compared to more than 50 per
cent of the coffee being exported in 1990-91 to the
erstwhile Soviet market as per the protocol between the two
countries, the proposition in 1991-92 came down to 35 per
cent and in 1992-93 to 20 per cent. In specific number, 110
million kg has been exposed so far in the export auction for
1992-93, with 91 million kgs being shipped, 14.4 million kgs
of them by coffee Board to the Russian market under the
existing trade protocol and another 10 million kgs outside
the protocol by private exporters to the same market as end
of January 1993~". However, government of India in an
urgent move to alleviate the difficulties faced by the
Indian commodity exporters, decided to provide technical
credit assistance for exports to Russia and accordingly, the
1. See The Economic Times, Bangalore, dated 4th March 1993.
2. Ibid.

last part of it to the tune of US$ 85 million was released
by 19th April 1 ~93~.
Seeing that there is no prospect for India to
trade with erstwhile U.S.S.R in the near future on the basis
of the above discussion and the country's Balance of payment
position is adversely placed against major industrial
countries4, it is imperative that the country should
recapture the traditional markets and improve the market
share in the newly emerged export markets in the hard
currency areas.
Tea
Indian tea is incompetitive in terms of price in
the United Kingdom, Ireland, the Netherlands, France, Canada
and Australia. In consequence, India's tea exports into
these markets registered a decline during the period of the
study. That the Government of India, in its Budget for the
year 1993-94, fully exempted
tea and Instant tea from the
3. See The Economic Times, Bangalore, dated 20th April 1993.
4. India's Balance of Payment is adversely positioned at
Rs.159 crores, with U.K., at Rs.217.1 crores with
Canada, at Rs.329 crores with Italy, at Rs.482 crores
with France, at Rs.555.6 crores with Latin America and
at Rs.230.1 crores with U.S.A in the year 1991-92. At
the same time, India has a credit balance with CIS to
the tune of ds.2187.1 crores. See Financial Express,
Madras, dated 19th April 1993.

excise duty (Customs duty on tea was already abolished in
the year 1978) should have a positive impact on the
country's tea exports to a certain extent that it will
reduce export prices. As a long-term measure, Government of
India in particular and the Tea Industry in general have to
take drastic measures to reduce cost oP production in the
tea plantations at least to the level that Indian tea can
compete with Sri Lnnkan and Kenynn ones in the higtily
competitive international market. Considering the fact
that, in India, the cost of living has been increasing and,
in tea industry, labour unions are well-organised and
powerful, pruning the wages in this labour-intensive
industry is out of question. Then, improving yield per
hectare but not resorting to coarse plucking which leads to
deterioration in the quality of tea, can be the only
alternative left. As a short-term measure, applying more
fertilizer, better management, more thorough weeding and
other technical improvements can be adopted to increase
productivity. As a long-term measure, replacing age-old
trees with high-yielding variety can be considered.
In the United States, the preference is generally
for iced and flavoured teas, for which cheap teas are mainly
bought from Argentina. It is learnt that Tea Board of India
has made some sincere efforts to push some cheaper south

Indian tea in U.S.A. It has yielded positive results but
not to the extent that the declining trend in India's tea
export to U.S.A reversed.
To our great gladness, Indian tea is competitive
and preferred in Germany, Japan and Saudi Arabia.
It is within the purview of the Government of
India and the Tea Board of India to pass legislation to
reduce or exempt duties and taxes which were already imposed
from time to time and to restructure the industry to make
the product competitive in the international arena. But,
what can the Government and the Tea Board do when the import
demand for tea in major traditional markets show declining
trends due to multifarious factors, all of them being
external to the country. Further, lnternational tea prices
tend to tumble! It was the shift in the consumers'
preferences or habits which decreased tea consumption in the
United Kingdom, Ireland, Australia and New Zealand during
the period of study. It is imperative for the tea exporting
countries in the world to launch an intensive, generic,
promotion in these markets that should change the consumers'
aversion to tea drinking, particularly of the young people.
Because, young people are challenging old tradition and
discarding tea as being, in their view, old fashioned.

The U.K. Tea council, through its generic
promotion has tried to arrest the decline in tea consumption
in U.K by creating a positive glamorous concept of tea in
the minds of the consumers so that it is regarded as a
desirable drink for virtually all occasions.
* counteracting the sociological trend that, in recent
years, have favoured instant coffee, alcoholic and soft
drinks, etc.
* awakening interest in tea among younger age groups,
especially the 14-24 years old, by bringing tea to
their notice in the modern context such as lemon tea,
orange tea, etc.
* associating tea with both traditional quality and with
the perceived attitudes of modern society, e.g.
fashion, pop music, slimming and health and training
for sport, etc.
The basic objective has been to change the
attitude of the young people to tea by emphasising its
special benefits such as being stimulating, refreshing,
sustaining, thirst-quenching, reviving, etc. Here, the Tea
Board of India and the U.K Tea Council can collaborate each
other for launching an intensive, generic promotion in West
Europe.

Whereas, in Canada, tea consumption has been
declining due to the reduction in consumers spending. This
declining trend can be reversed by introducing and promoting
new items like iced and flavoured tea, orange tea, lemon
tea, etc.
Tea industry in India has to see that adequate
exportable surplus is created at a lower price for U.S.A.,
France and Netherlands where the Indian tea is incompetitive
and at the prevailing price as maximum for Japan, Saudi
Arabia and Germany where Indian tea is competitive in terms
of price. Because, tea consumption in all these markets
shows an upward trend.
And, it is needless to say that India has to
augment her domestic tea production to leave a sizeable
cxportuble surplus ufter meeting the pressure ol internal
demand.
Coffee
India being a marginal exporter with a world share
around 2.0 per cent , can not influence the world coffee
market (Brazil and Columbia, respectively, the first and
the second largest coffee exporters rule the world coffee
market).

Coffee consumption in U.S.A. Sweden, Switzerland
and Canada is price responsive. Hence, the devaluation of
Indian rupee against major currencies,coupled with a cent
percent convertibility of Indian currency announced in the
Union Budget for the year 1993-94 is likely to increase
India's coffee exports to these markets.
It was the spread of coffee drinking habit that
increased coffee consumption in the U.K. Australia, Belgium,
Italy, Japan the Netherlands and Spain during the period of
the study. Ceteris paribus, India being a marginal
exporter, can keep pace with general trends in coffee
CO~S~mpti~n in these markets or even overtake the overall
trends by a generic promotion that should help Indian Coffee
from other coffees in terms of quality, taste, etc.
Demand for coffee in Prance is inelastic that
coffee is an essential beverage in the country. If India is
able to differentiate its coffee from other coffees in terms
of yuality, Indian coffee can be sold here at fancy prices,
provided that consumers are quality conscious.
The German coffee market is unsaturated that
consumers continue to spend more and more. Coffee industry
in India has to take adequate measures to export more coffee
to exploit this unsaturated market to increase its export

earning from coffee. One of them can be the avoidance of
delay in shipping coffee to Germany.
There is no denying that world demand for coffee
has been increasing. Therefore, it is imperative for the
coffee industry in India to create an adequate 'exportable
surplus' to increase or at least to maintain the country's
market share in the expanding international coffee market.
Cashew kernels
The disruption of the world cashew market in the
late 1970s has changed the pattern of imports of cashew
kernels into major consuming countries. In consequence,
Brazil emerged as the world's second largest exporter of
cashew in the 1980s. Of course, world cashew industry has
regained strength in production and exports but not to that
level in the early and mid 1970s. It can be implied that
world cashew supply is less than the world demand. Further,
the cashew kernel is a luxurious consumer item and hence the
demand for it should be elastic. Hence, any policy implied
on India's export trade in cashew kernels should be based
against this background.
Provided that world demand for cashew exceeds the
world supply, the country, at present, can not and need not

depend upon the erstwhile U.S.S.R
'exportable surplus ' .
to dispose of its limited
Of course, cashew consumption in U.S.A and Canada
are price responsive. Here, the presence of Brazil becomes
larger and larger and the Indian cashew is incompetitive in
terms of price also. The recent devaluation of Indian
rupee against U.S and Canadian dollars may help make Indian
cashew competitive in these markets. But the fact that
Brazil's proximity to North America reduces shipping cost
significantly by which Brazilian cashew can be under-priced
to the amount of the additional shlpping cost incurred on
Indian cashew, drives Indian cashew exporters to
desperation. Hence, it is imperative for the Cashew Export
Promotion Council of India and the Government of India to
launch a generic promotion to assert the superiority of
Indian cashew in U.S. and Canadian markets to off-set the
Brazil's geographical cost advantage.
Further, the Cashew Industry in India is to create
sufficient exportable surplus to feed the United Kingdom,
the Netherlands, Germany and Japan where cashew eating habit
has been spreading.
Cashew consumption in Australia has been
declining, yet market for Indian cashew in the country is a

promising one. Here, India has to thrust against the
downward trend in cashew consumption by way of creating an
awareness among the people of the nutritive value of cashew
kernels.
India being the world's largest tea and cashew
exporter,Government of India can take initiative to make an
International Agreement on tea and cashew similar to that of
International Coffee Agreement which should help arrest the
erratic fluctuations in the international prices of tea and
cashew kernels. This should ensure:
(i)
a reasonable price to the thousands of tea and cashew
growers in the country in particular and in the world
in general, and
(ii) an affordable price to the consumers in the importing
countries - many of them appenr to have already
deviated from the tradition.

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INSTITUTIONAL PUBLICATIONS
Director General of Monthly Statistics of
Commercial Intelligence and Foreign Trade of India,
Statistics (DCCIBS) Various issues
Calcutta, India.
Indian Institute of Public Monthly Commentary on
Opinion, New Delhi, India. Indian Economic
Conditions, Various issues
Indian Institute of Foreign
Trade, New Delhi, India.
Inter African Coffee
Organisation
Ministery of Finance,
Government of India, New
Delhi, India.
Reserve Bank of India,
New Delhi, India.
The Coffee Board of India,
Bangalore, India.
Foreign Trade Review
(Quarterly), Various issues
African Coffee (Quarterly,
Various issues
Report of Economic
Survey, Various issues
Reserve Bank of India
Bulletin, Various issues
Report on Currency and
Finance, Various issues
Coffee Statistics, Various
issues
Indian Colfee (Monthly),
Various issues
The Cashew Export Promotion Cashew Bulletin (Monthly),
Council of
India.
India, Cochin, Various issues
Indian Cashew Journal
(Quarterly), Various issues
The Coffee Board of Kenya,
Kenya.
The Directorate of Cashew
Development, Cochin, India.
Kenya Coffee (Monthly),
Various issues
The Cashew (Quarterly),
Various issues
The Tea Board of India, Tea Statistics, Various
Calcutta, India.
issues
Tea Journal (Monthly),
Various issues

APPENDIX
EXPORT VOLUME
The data on the export volume of these commodities
were collected from concerned organisation viz. Tea Board
of India, International Coffee Organisation and Export
Promotion Council of India. In case of tea and coffee,
export values deflated with appropriate Export Unit Value
Indices, were used on the mere fact that aavalues were
higher than that when the export volumes were used. It may
be due to the fact that there are different varieties of tea
and coffee with varying prices and so the deflated export
values are likely to be more reflected by the weighted
average price indices of these commodities. At the same
time, export volume itself is used in case of cashew
kernels.
WORLD PRICE
They are the annual average prices of Indian tea
prevailing in the London Spot Market, Annual average prices
of coffee (Other Milds) quoted in the New York Spot Market
and the Annual average cashew kernel prices (W320)
prevailing in the New York Spot Market.

INTERNAL PRICE3 OF COMMODITY
They are the price indices of tea, coffee and
cashew kernels, published by Ministry of Finance, Government
of India.
LAGGED PRICES
Both the international and internal prices have
been lagged to the extent of one year on the assumption
that, though the nature of production of these commodities
are more or less price-inelastic, there is much possibility
of hoarding to speculate in the world market.
PRODUCTION
Production data have been compiled: from Tea Board
of India on tea, from F.A.0 production year Book on coffee
and from Cashew Export Promotion Council of India, on cashew
nuts.