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Trouble brewing

Amidst global lockdowns, the Indian tea industry is experiencing its worst financial crisis, endangering the livelihoods of millions, write Shahid Akhter & Biswanath Dash

Trouble brewing

The infectious disease COVID-19 caused by SARS-CoV-2 has put the world into a serious pandemic. The global economy is heading towards a very sudden and unprecedented recession. As WTO projected, the world economy will plunge by anywhere between 13 per cent and 32 per cent in 2020. The unprecedented nature of the health crisis has severely disrupted international trade as well as the global supply chain. According to the United Nations Department of Economic and Social Affairs (DESA), the world economy could potentially plummet by 0.9 per cent in 2020, lower than the global financial crisis in 2008-2009 which had dropped by 1.7 per cent. An analysis from the United Nations Conference on Trade and Development (UNCTAD) predicted that overseas export markets could face a $2 trillion to $3 trillion splash in investment for the next two years.

The deteriorating global economic conditions, foreign and fiscal exchange constraints are going to hit the Indian tea industry hard which is currently contributing 31 per cent of global production and standing fourth in terms of exports. Over the last few decades, the tea industry has played a very significant role in the country's GDP growth and foreign exchange earnings. India is exporting various varieties of tea to around 140 countries across the world. According to the Tea Export Report of India, in FY 2017-18 the tea exports were valued at $ 785.92 million and $830.90 million in FY 2018-19. Iran and Russia are the top export destinations and they together constitute 36 per cent of India's total export market. The other major tea export destinations are the CIS countries, the USA, Germany, UK, UAE, Egypt, Pakistan and China.

The international border of all European countries and more than 100 other countries across the globe are under siege to contain the further outbreak of deadly contagion. According to IMF Managing Director Kristalina Georgieva, a sharp decline of consumption is predicted in the European Union and the United States which will lead to curtailing the imports of consumer goods from developing countries. It is again uncertain and hard to predict for the development of immediate effectiveness containment measures. If restrictions at international borders continue, the situation will be a catastrophe for many countries in the world. Such adverse effects of prolonged border restriction and a sharp downturn of capital flows in the major tea importing countries will cause a severe economic crisis in the tea industry of India.

PK Bezboruah, chairman of Tea Board of India said that the tea industry of North India will lose Rs 2,000 crore and a total of almost 150 million kg crops due to Centre-enforced nationwide lockdown. United Planters Association of Southern India (UPASI) and North East Tea Association (NETA) estimated that the tea industry across the country will lose nearly 10 per cent of the total annual production. The economy of North Bengal and Upper Assam is entirely reliant on tea. Assam contributes half of the country's total tea production which is 1, 300 million kgs 51 per cent of the total while another 25 per cent comes from West Bengal. According to NETA, Assam itself will lose around Rs 3,000 crore which is nearly 25 per cent of annual output amidst the lockdown. Similarly, the study by UPASI estimated that the tea gardens in South India will lose around 23 million kgs. The world-famous Darjeeling tea has already been lost its first flush (March) production and the second flush (May) is also adversely affected.

Unfortunately, the major domestic tea consuming states of India such as Maharashtra, Uttar Pradesh, Gujarat, Rajasthan, and Madhya Pradesh are facing a higher pandemic crisis among the states. In this scenario, undoubtedly the tea industry is in deep trouble regarding the domestic market as well and is likely going to experience its worst-ever distress in its 180 years of its existence.

For a decade now, the Indian tea industry has already been facing a serious threat in the international market due to high competition with other exporting countries. Also, tea exports face some other challenges such as lower production of orthodox teas, inferior quality, limited market accessibility, higher cost of production, fluctuating international demand and various tariff and non-tariff measures in the tea importing countries. Even though India has a huge domestic market (constituting 80 per cent of its total consumption), the

foreign exchange plays a

vital role in stimulating the financial growth of the country and balancing uncertain economic landscape in the tea industry.

Statistics says that more than 11 million people directly or indirectly are involved in tea production activities for their livelihood, and around 50 per cent among them are women who come from weaker sections of the society. More than that, small tea gardens and growers contribute almost 51 per cent of the country's total tea production. The breakdown of global supply chains and the downturn of domestic demands will leave deep scars on the lives of millions of labourers and small tea growers. The pandemic will disproportionately hit and reverberate across the tea ecosystem, impacting social protection, human rights, education, and in the worse cases, basic food security and nutrition.

As mitigation measures, both the Centre and State government should keep political rivalry aside and determine to build-up strong solidarity to deal with this unprecedented crisis by developing multiple strategic management plans. It is being projected that globalisation is going to be a new normal; in that scenario, the government needs to rethink existing bilateral and multilateral packs and set-up various trade agreements especially with the countries which are less impacted. Attention is required to further strengthen domestic supplies of tea and flow freely across the state borders without grinding

any halt. Priorities should also be given on the re-assessing and re-imagining modes of supply, consumption, and productivity. Finally, both the Centre and state governments need to provide unprecedented support by rolling out a special stimulus package for those engaged with the tea production.

Shahid Akhter is a Research Scholar at BITS Pilani, Hyderabad. Biswanath Dash is an Assistant Professor for the Department of Humanities and Social Science at BITS Pilani, Hyderabad. Views expressed are strictly personal

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