Composition of India’s tea trade with ASEAN: An assessment
India’s signing the agreement with ASEAN would finally eliminate duty on 80 per cent of the goods traded at present. The Applied Most Favoured Nation (MFN) tariff rates on products such as coffee, palm oil, pepper and tea will be brought down in phased manner. In the case of tea, the reduction commitment is 100 to 50 per cent by 2019. There is a worry that reduction in import tariff on tea will influence Indian tea industry adversely, and even if the deficient Rules of Origin China’s tea may enter Indian markets through ASEAN. Indonesia and Vietnam are major tea exporting countries among ASEAN region. Indonesia and Vietnam together export in terms of quantity 8.5 per cent of the world tea exports during 2012-13. It would be great advantage for Indonesia and Vietnam to explore the huge Indian domestic market under the free trade agreement (FTA). In 2015-16, the share of ASEAN in India’s total tea imports is 9.87 per cent; this represents 6.42 per cent of ASEAN total tea exports and recently has been declined. With further reduction in import tariffs on tea from ASEAN countries, there is an apprehension that, ASEAN countries tea exports to India may increase drastically and will affect Indian tea industry adversely. There is an emerging concern for tea industry of India under India-ASEAN FTA. In this backdrop, the paper analysis the impact of ASEAN-India FTA on Indian Tea trade and the assessments is based on the unit values of exports and imports, growth rates in production and productivity and the area under tea cultivation in the ASEAN and India during 1991-2014. The outcome of our opening analysis show that the export unit value of tea of Thailand, Vietnam and Indonesia is lower than the import unit value of Indian tea. So at present India is importing tea at a higher rate. Due to export price advantage, Thailand, Vietnam and Indonesia may increase their tea exports to India. Analysis of compound annual growth rates of tea exports in production, yield and area expansion during 1991-2014 shows that, Vietnam registered high compound annual growth rates in production, yield Malaysia followed by Vietnam and area expansion Thailand followed by Vietnam. In India, tea production, yield and area expansion in recent years have been come down. But domestic demand for tea in India is increasing. It shows that, among all the ASEAN countries, only Vietnam and Thailand are a huge tea market in India. Based on these preliminary analyses, we find that with regard to tea, India is in a disadvantageous position to gain from the FTA with ASEAN countries.