Impact of Global financial crisis on Indian plantations

Dr. M.D Baby

Reader & Head-Dept of Commerce,
St. Dominic’s College, Kanjirappally, Kerala
drbabymukalel@rediffmail.com
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Plantation crops in general are either export oriented or import substituting and therefore assume special significance from the national point of view. The impact of the global crisis has been transmitted to the Indian economy through three distinct channels viz. the financial sector, exports and exchange rates. There has been sharp decline in the exports of agricultural and allied products specifically to countries including the US and Europe during last two years. This study attempts to find out the effect of global financial crisis on the export of Indian plantations.

Introduction
Plantation crops in general are either export oriented or import substituting and therefore assume special significance from the national point of view. Tea, which is extensively grown in north Bengal, Assam and other north-eastern states, coffee, spices and rubber are primarily grown in southern India. It is estimated that nearly 30 lakh families are dependent on the plantation sector for livelihood. India is the fourth largest producer and consumer of natural rubber with a share of 8.9 per cent in the world after Thailand, Indonesia and Malaysia. Area under coffee registered substantial increase during the last two decades with an annual growth rate of over 2 per cent. Coffee provides opportunities for livelihood to nearly one lakh families including agricultural labourers. Among the plantation crops, coffee has made significant contribution to the Indian economy during the last 50 years, Although India contributes only 4 per cent of total world production, Indian coffee has created a niche for itself in the international market, particularly Indian Robusta, which is highly preferred for its blending quality. Tea is one of the largest foreign exchange earners and sources of government revenue in India. It employs more than 20 million people and half of the work force constitute of the women folk. However the market for cardamom is largely domestic as could be seen from the declining share of exports and the share of exports is only 5 per cent of the production.

Objective of the study

There has been sharp decline in the exports of agricultural and allied products specifically to countries including the US and Europe during last two years. This study attempts to find out the effect of global financial crisis on the export of Indian plantations.

Impact of global financial crisis on Indian plantation exports

The impact of the global crisis has been transmitted to the Indian economy through three distinct channels, viz., the financial sector, exports, and exchange rates. While exports of both goods and services, still account for only about 22 percent of the Indian GDP, their multiplier effect for economic activity is quite large. The current global financial crisis has had its impact on Indian coffee exports though it did not have much effect on domestic prices and domestic consumption. Even as India’s exports have diversified product-wise and destination-wise in recent years, there has been acceleration in exports of rice, tobacco, spices oil-meal and marine products. But exports of commercial crops such as tea, coffee and cotton have decelerated. India’s trade data for January 2009, showed a 16 per cent drop in exports and 18 per cent decline in imports.


Production & export of Natural rubber

Year Production ( In tonne) Export (In tonne)
2003-04 711650 75905
2004-05 749665 46150
2005-06 802625 73830
2006-07 852895 56545
2007-08 825345 60353
2008-09 864000 45538
Source: Rubber board

Prices of natural rubber

Year Month RSS 5 (Rs per Quintal)
(domestic) RSS 4 (Rs per Quintal)
(domestic) RSS 3 (Rs per Quintal)
(international)
2008 August 13549 13782 12720
2008 September 13284 13536 13228
2008 October 8831 9074 9963
2008 November 7413 7681 8599
2008 December 6279 6488 6156
2009 January 6874 7034 7449
2009 February 6788 6903 7331
2009 March 7448 7583 7388
Source: Monthly Rubber Statistical News, Rubber Board.

Production & export of Coffee


Year
Production(M.T) Export
Quantity (M.T) Value (Rs Crores)
2006-07 2.88 2.49 2008
2007-08 2.62 2.19 2047
2008-09 2.62 2.02 1925
Source: Coffee board

Export of Tea

Year Export
Quantity (m Kg) Value( Rs Crores)
2004-05 205.81 1924.71
2005-06 196.67 1793.58
2006-07 218.15 2045.72
2007-08 185.32 1888.68
2008-09 190.64 2381.79
Source: Tea Board
Export of Cardamom

Year Export
Quantity ( M.T) Value ( Rs Crores)
2005-06 1909 37.83
2006-07 2150 39.31
2007-08 1825 39.75
Source: Spices Board Kochi.
Findings

1. Production of natural rubber showed an increasing tendency till 2006-07. But there wad a reduction in production in 2007-08.
2. The export of natural rubber was 75905 tonne in 2003-04 to but it reduced to 60353 tonne in 2007-08 and further it reduced to 45538 tonne in 2008-09.
3. The price per quintal of RSS 5 has been reduced to Rs 6279 in December 2008 as compared to Rs 13549 in August 2008.
4. The production and export of Coffee has been reduced to 2.62 M T and 2.02 M T respectively in 2008-09 as compared to 2.88 M T and 2.49 M T in 2006-07.
5. The export of tea is reduced to 185.32 M kg in 2007-08 as compared to 218.15 m kg in 2006-07. But it showed a slight increase in 2008-09. But the export values of tea are little improved.
6. The export of Cardamom is reduced to 1825 M tonne in 2007-08 as compared to 2150 M. tonne in 2006-07. But the value of export is increased from 37.83 Crores to 39.75 Crores.

Conclusion

The exports of natural rubber, Coffee, Tea and Cardamom from India have been negatively affected by the global financial crisis. Exports of Coffee were declined from 2.49 lakhs tonne in 2006-07 to 2.02 lakhs tonne in 2008-09. The export of natural rubber came down from 73830 M tonne in 2005-06 to 45538 MT in 2008-09. Again the prices of natural rubber per quintal were come down from 13549 in August 2008 to 6279 in December 2008. From 218.15 M Kgs in 2006-07, India’s tea export came down to 190.64 M Kg in 2008-09. The export of cardamom has shown an increase of 2150 MT in 2006-07 as compared to 1909 MT in 2005-06. But the export of cardamom in 2007-08 is reduced to 1825 MT. But the export value of cardamom in 2007-08 is increased to 39.75 lakhs from 37.83 Lakhs in 2005-06. The marketability of plantation crops must be improved through quality enhancement programmes and exploration of new areas of market. Whether global warming and climate change would affect plantation cultivation especially coffee in South India needs to be researched. Further greater spending on agricultural research, for promoting agricultural growth, is necessary.

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