PhD

Indian small cardamom is known worldwide for its quality and is exported to many countries around the world. Formerly, India enjoyed a monopoly in the production and export of small cardamom in the world. Since 1980s, the country lost its share in the international market to Guatemala due to comparatively higher price and increasing domestic demand for the commodity. The present study on “Dynamics in prices and trade of Indian small cardamom and its implications on producers” was undertaken with the objectives, to study the economics of small cardamom cultivation and marketing, analyse the price formation and transmission between Indian and international markets, study the supply response of cardamom, analyse India’s export performance and competitiveness and assess the implications of changes in price and trade at the farm level. The study was based on both primary and secondary data. In order to estimate the economics of cultivation and marketing of small cardamom, primary data were collected from 160 selected farm households in Idukki district of Kerala and from 52 market intermediaries in Kerala and Tamil Nadu. The secondary data on area, production, prices and exports of small cardamom published by various institutions for the period from 1970-71 to 2017-18 were collected in order to study the price formation and transmission between the international and domestic markets, to find out the export performance and competitiveness of Indian small cardamom and supply response of cardamom to prices. The economics of small cardamom cultivation in Idukki district of Kerala was estimated using the concepts of establishment cost and maintenance cost. The total cost of cultivation and production of small cardamom in Idukki district were estimated as ₹4,79,040 per hectare and ₹375 per kg respectively, while the net returns earned by the farmers was ₹9,18,366 per hectare. The major marketing channels identified for small cardamom were, Channel I: Producer-Village trader-Auctioneer-Wholesaler-Retailer-Consumer; Channel II: Producer-Auctioneer-Wholesaler-Retailer-Consumer; Channel III: Producer-Village trader-Auctioneer-Exporter-Consumer and Channel IV: Producer-Auctioneer-Wholesaler-Upcountry wholesaler-Retailer-Consumer. Majority of the farmers (49 per cent) were selling their produce to the village traders, while 32 per
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cent of the farmers were selling to auctioneers. The marketing efficiency was found to be highest in channel II because of the low marketing cost and margin, and high producer’s share in consumer’s rupee. The marketing efficiency was found to be lowest in channel III. The co-movement between the cardamom prices in the Indian and international markets was confirmed in the post-WTO period, while there was no integration in the pre-WTO period. The transmission of price signals between Indian and international markets was also established for period I, period III and period IV. The price series of different grades of cardamom in the domestic market were found to be moving together in almost all the periods considered. Thus, the price of cardamom in one market was found to be having considerable influence on the price prevailing in the other market after the liberalisation of trade. The Error Correction Model (ECM) indicated the presence of short-run disequilibrium between the Indian and international prices, and between the prices of different grades of cardamom, which got corrected with varying speed of adjustment. Granger causality test confirmed that the price transmission was from the international market to the Indian market in the long-run. The elasticity of supply of small cardamom with respect to its own price lagged by two years was positive and significant in both the short-run (0.39) and long-run (0.96). The rate of growth in the export of small cardamom from India increased, while the instability in export declined in the post-WTO period as compared to the pre-WTO period. The export quantity contributed to about 80 per cent growth in the export value of small cardamom in the post-WTO period. Nearly 85 per cent of change in the variance of export value in the post-WTO period was due to the change in the variability of export unit value of small cardamom. Among the different periods considered for the study, period I recorded a higher growth rate of export and lower instability in terms of value and unit value, while period II witnessed the lowest and negative growth rate with high instability in the export of small cardamom. Geographic concentration of small cardamom export from India always remained high and it further increased in the post-WTO period. Over the years from period I to period V, there was a steady and gradual increase in the geographic concentration of export. There was a changing pattern in the stability of export markets for Indian small cardamom, and the probability of retention of major countries was
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declining over the years with the exception of Saudi Arabia. It was found that Saudi Arabia, Malaysia, Japan and UAE were the stable markets in both pre-WTO and post-WTO periods. Even though India gained considerable market share of new markets viz., UK, Iran and Bangladesh, it lost some of the traditional export markets viz., Kuwait, UAE and Qatar. The export demand for Indian small cardamom was determined by the GDP per capita in the importing countries in both pre-WTO and post-WTO periods, while the export supply was influenced by the ratio of export price to domestic price and the domestic production. The indices of export competitiveness viz., the Nominal Protection Coefficient (NPC) and Effective Protection Coefficient (EPC) values were greater than one (1.33) indicating lower export competitiveness of Indian small cardamom. Domestic Resource Cost Ratio (DRCR) was less than one (0.22) which indicated India’s comparative advantage in the production of small cardamom. Variance in producer prices influences the welfare of the farmers by affecting their income. The variance in exchange rate was found to be the major source of variation in producer prices in the pre-WTO period and period II, while the variance in export unit value was the major determinant in the post-WTO period, period I and period III. The challenges in small cardamom cultivation need to be addressed by introducing varieties that are both pest resistant and high yielding, formulating effective organic inputs and providing replanting subsidy at a reasonable rate to the farmers. Regarding the price and trade of cardamom, crop specific price stabilization mechanism is needed to tackle the excessive volatility in cardamom prices. More transparency is required in the e-auction system to reduce re-pooling by traders and ensure faster payment to the farmers. In order to promote export and improve India’s competitiveness, farmers should be encouraged to follow Good Agricultural Practises (GAP) that will help to reduce the input usage, which will in turn improve the quality of the commodity and reduce the cost of production. Effective ban on toxic chemicals at the national level is necessary to keep the residual toxic content in small cardamom within the permissible limits. Branding of Indian small cardamom which is of superior quality could also help in promotion of the commodity in the international market.