EXPORT PERFORMANCE AND COMPETITIVENESS OF GINGER FROM INDIA

Thesis submitted to the University of agricultural sciences, Dharwad In partial fulfillment of the requirem ents for the Degree of

MASTER OF BUSINESS ADMINISTRATION in AGRIBUSINESS

By THANUJA.W .J

DEPARTMENT OF AGRICULTURAL MARKETING, CO-OPERATION AND AGRIBUSINESS MANAGEMENT COLLEGE OF AGRICULTURE, DHARW AD UNIVERSITY OF AGRICULTURAL SCIENCES DHARW AD-580005

SEPTMBER,2006

ADVISORY COMMITTEE

DHARWAD SEPTEMBER,2006

(H.S.S.KHAN) MAJOR ADVISOR

Approved By: Chairman: _______________________ (H.S.S.KHAN) Mem bers:1.______________________ (H.S.VIJAYKUMAR) 2.______________________ (S.B.MAHAJANSHETTI) 3.______________________ (H.BASAVARAJ) 4.______________________ (T.N.VENKATESHMURTHY)

CONTENTS

Chapter No.

Title

I.

INTRODUCTION

II.

REVIEW OF LITERATURE

III.

METHODOLOGY

IV.

RESULTS

V.

DISCUSSION

VI.

SUMMARY AND POLICY IMPLICATION

VII.

REFERENCES

LIST OF TABLES
Table No. 4. 1

Title

Trends in Domestic Prices and International Prices

4. 2

National protection coefficient

4. 3

Transitional Probability Matrix Of Indian Ginger Export

4. 4

Growth rate of Area and Production of Ginger in India for Pre-Liberalization period

4. 5

Growth rate of Area and Production of Ginger in India for post-Liberalization period

4. 6

Growth rate of Export quantity and Export value of Ginger in India for PreLiberalization period

4. 7

Growth rate of Export quantity and Export value of Ginger in India for postLiberalization period

4. 8

Correlation

LIST OF FIGURES

Table No.
1.

Title

Graphical representation of the study area

2.

Statewise area of ginger

3.

Production of ginger

I. INTRODUCTION
India is rightly called as spice bowl of the world for its production of variety and superior quality of spices. Growing spices for various purposes has been famous since the ancient times. There are records about various spices and its properties in the Vedas as early as 6000BC. India is well known for trade since the exploration of sea routes. All these attracted the foreigners to India and this is the key reason India was invaded by the European countries and was imperialized. To such an extent India was famous for the spices. According to the Bureau of Indian Standards (BIS), 63 spices are grown in India. The spices are grown through out the country from tropical to temperate climate. India has highest number of spice varieties in the world. As per the definition of International spice groups spices are any of the flavored or aromatic substances of vegetable origin obtained from the tropical or other plate, commonly used as condiments or employed for other purposes on account of their fragrance, prevention or medicinal qualities. Among these, ginger is one of the mainstay in Indian spice account, which has been used for flavoring and medicinal purposes. Ginger occupies fourth position among spices produced in India. With regard to export, ginger occupies fifth position in terms of quality and sixth position in export earning amongs spices.

Origin and Botany of Ginger

Ginger (Zingiber officinale roscoe L.) is a tropical perennial herb of the Zingiberaceae family. Elongated, curping, multi branched, irregular, fleshy and pungent, its rhizome is prized for its healing properties since antiquity. Though originated in Tropical South East Asia, it is widely grown in India, Jamica, Hawai, Australia and Nigeria. Ginger is an important spice used as taste maker, flavorant, appetizer and in drugs, in fresh, dried or powdered form. Growing of ginger is economical to the farmers and it is a health supplement for consumers. Importance of ginger for health is known from vedic time, mentioned it as Mahushad (meaning great medicine) and Vishwa Bheshajam (meaning universal medicine). All the Kashayam of Ayervedic medium has dried ginger as its ingredient. Ginger improves voice, digestion, removes toxins from body, improves vitality and strengthen the heart. Thus, ginger has been used over 5000 years both for medicinal properties and culinary values. With an appeal for ginger-based preparations, extract of ginger, ginger oil etc, have been encouraged. It is very useful for cold induced diseases, nausea, asthama, cough, heart palpitation, syperia and home remedy in the country as it was 2000 years ago. These added medicinal values besides taste-maker need to be popularized, supported with clinical tests having scientific evidences. Ginger contains 2-3 per cent protein, 0.9 per cent fat, 1.2 per cent minerals, 2.4 per cent fibre, 12.3 per cent carbohydrate and a good source of calcium, phosphorous, iron and vitamins. The pungency of ginger has all the constituents, which are needed for good health and improving the quality of food.

Global Scenario
India is in a predominant position in ginger production contributing 36.5 per cent to the total world production. Besides Indian, ginger is also cultivated in other tropical and subtropical countries like China, Indonesia, Bangladesh, Thailand. Indian ginger was exported to USA, UK, Netherland and Canada. India is also the largest producer of dried ginger in the world and has established trade in ginger since early middle ages. India with production of 2.3 lakh tonnes of ginger, is the largest producer of ginger in the world followed by China (1.6 lakh tonnes)

Indian Scenario
The estimated production of ginger is 281,160 tonnes from an area of 83,220 ha with a productivity of 3,379 kg/ha (2003-04). Though ginger is an annual crop, its production depends on weather parameters. No wide fluctuations are seen in both area and production trends. Area, production and productivity have consistently shown an increasing trend during the last three decades. Owing to versatality in adoption for climate and soil, ginger is grown in almost all the states in the country. However, Kerala, Meghalaya, Arunachal Pradesh and Orissa together contribute over 60% of the total production. Kerala has highest area of 14,570 ha with production of 49,950 tonnes. It accounts for about 19% both in area and production followed by Meghalaya (18.60%) and Arunachal Pradesh (11.80%) Orissa ranks fourth with a share of 10.20% in production. Kerala ranks first in area and production is almost stagnant during last 20 years and the production showed a slow pace of growth during this period. India has an excellent research and developmental support in spices production. The Indian council of Agricultural Research with All India Co-ordinated Research Project on spices, has the responsibility of providing research support. Besides research on post-harvest management and value addition is also have been done in the laboratories of CSIR.

Organic Ginger
With the appreciation of organically grown foods and growth potential of more than 20% annually, there is an increasing demand for organically grown ginger both in fresh as well as in dried forms.

Value Addition
Ginger oil is extracted from unscraped dried ginger or from ginger scraping or fresh ginger. The oil possess aromatic odour but not the pungent flavour (Bite) of spice. The odour of oil is quite lasting and the physico-chemical characteristics of ginger oil vary depending upon variety, age or period of storage and method of extraction. It is economical and convenient to recover oil and oleorisin from dried ginger than from fresh ginger and fresh scraping of ginger which is quite rich in oil but it should be immediately used for steam distillation. The essential oil derived from ginger is known in trade as oil of ginger, it is greenish to yellow in colour, has a characteristic of warm and aromatic odour. The oil is sparingly soluble to observe 95 per cent in alcohol, ginger oleoresin is mainly acted on commercial scale in India and abroad. It has great demand in various industries. The amount of essential oil in oleresins in different ginger growing areas varies from 7.28 per cent. Non pungent substances may amount for 30 per cent of the content of 18.35 ml volatile oil per 100gm of oleoresin. Products from ginger are ginger preserve or Murabba, ginger candy, soft drinks like ginger cocktail, ginger pickles, salted ginger, in vinegar or vinegar mixed with other materials like lime, green chilli and alcoholic beverages like ginger wine, ginger brandy and ginger beer. Though there are many value-added products available, still there is more potential scope for diversification of products.

Approach to tenth plan

The developmental programmes taken up during the decade have created an impact, which is being continued in the tenth plan are. Promoting of ginger varieties available in the country, which have yield potential and better export demand, and undertaken their development. Promoting the production of quality planting material in large scale, adopting the latest technology including tissue culture techniques through departments, research institutes, voluntary and private small organizations and individuals.

Promoting biofertilizers, biopesticides and organic farming for environment friendly cultivation practices. Motivating farmers to follow improved cultivation methods including adequate plant protection measures through field demonstrations and supply inputs. Developing water resources and providing irrigation facilities. Imparting training to different levels of officers of state Agricultural or Horticulture Department on latest technologies for increasing production, productivity, quality improvement and storage. Encouraging value-addition for promoting export.

Taking into consideration, the growing demand for species in the domestic as well as in export market for culinary and pharmaceutical requirements, an annual increase of 8.00 per cent has to be achieved in the plan period. To boost the export, Agri Export Zones (AEZs) of ginger are also being created with a aim to converse the programme in project having maximum output upon the intervention, having improved production system, value addition and maturity. The AEZs have been sanctioned for ginger in Assam and Sikkim and the work is in progress for the establishment of AEZs.

Trade and Marketing

Wide production base has provided enough flexibility in times of establishing ginger trade. Indian ginger or Cochin ginger is considered one of the best in the world. Export of ginger showed a highly fluctuating trend during the last 40 years. Indian ginger is mainly exported to Pakistan, Bangladesh, Saudi Arabia, UAE, Morocco, USA, etc. The markets for dried ginger are Saudi Arabia, USA, Yemen, Morocco, UAE and Bangladesh. Major competitors in ginger export are China, Nigeria and Thailand. India has also imported significant quantities of ginger in various forms, viz. ginger fresh, ginger unbleached, ginger bleached, ginger powder, (not elsewhere specified) including dried ginger to the tune of 12,807 tonnes valued @ Rs. 1,925 lakh. Nepal has been our main source of import. Marketing system, operating currently do not provide remunerative prices benefit to the farmers, who will suffer during the harvesting season for want of storage facilities. The credit support against the produce would enable the farmers to get better return.

Specific objectives
1) To study the trends in domestic and international prices of ginger. 2) To study the competitiveness of Indian ginger. 3) To analyse the direction of trade of ginger export from India. 4) To study the impact of withdrawal of freight subsidies on exports. 5) To study the spatial integration of domestic wholesale market in South India.

Limitation of the study

The present study was limited to export of dry and fresh ginger from India since, the data pertaining to the procured forms viz. ginger paste, ginger oil, ginger oleoresin are not available. Even though many markets are there in other states, it was not able to correlate with these markets due to long distance for export.

Presentation of the study

For analytical convenience, the thesis is organized into seven parts Chapter one starts with introduction, the scope and objectives of the study.

Chapter second presents about related review of literatures. Chapter three covers the study area and methodology used in the study. Chapter four summarizes the results under appropriate heads in consistent with the objectives of the study. Chapter five seeks to interpret the results of the study and explains the casual relationship between certain variables and their out come. It also discusses a frame work for drawing policy measures. Chapter six summarizes the results and suggests appropriate policies based on the findings of the study. Chapter seven presence the references

II. REVIEW OF LITERATURE

Review of literature gives the guidelines from the past researchers and provides foundation to the theoretical frame work for the present investigation. The review of past literature makes the investigator to get an insight in to the methods and procedures to be followed. Since the available literature relevant to the objectives of the present study were rather limited, the studies related to other crops or technologies were also reviewed and presented under the following headings 2.1 Trend analysis 2.2 Normal protection coefficient 2.3 Direction of trade 2.4 Market integration 2.5 Growth analysis

2.1

TREND ANALYSIS

Parikh (1971) with the help of spectral techniques analysed the short term fluctuations in coffee prices. The occurrence of 24 months cycles study revealed that various price series were coincident. He observed that through the bread features of the coffee cycle could be interpreted fairly easily, a full understanding would require a simultaneous equation of accommodative model considering the response of production, consumption and state of price changes. He used the original series trend, eliminated series and fitted series for coffee prices recorded in New York market for various grades of coffee. Jairth and Kansal (1981) studied the price behaviour of Himachal and Kashmir apples in Delhi market. They found that in general, the wholesale prices of both the varieties showed a rising trend and seasonal variation was more in case of arrivals when compared to that in prices. Hosamani et al. (1981) examined the structural movement of market arrival and price behaviour of cotton in Belgaum district. The pattern of market arrivals of cotton indicated a seasonal character in both the markets. A major proportion of the total annual market arrivals coming to the markets during the peak months of the harvest. They reported that the seasonal pattern of arrivals was due to the high post harvest sales which in turn was due to financial pressure, inadequacy of warehousing facilities, inability to withhold structure and income not only additional cost on storage but also bear the consequences of price fluctuations. They mentioned the need for developing storage facilities and linking them up with credit and marketing functions to prevent farmers from exploitation. Bagahawatte (1988) employed the BOX-Jenkins Auto Regressive Integrated Moving Average (ARIMA) approach to study the seasonal variations in retail and wholesale prices of rice in market of Colombo and found that seasonality, retail prices were more prominent than wholesale prices. He also reported that the interaction between actual and wholesale prices of periods T+1, T+2, T+3 were significant. Findings of the study which inturn implied that any increase in supply of rice due to retail price in period t will arrive in the market at period t+3 for preventing any further increase in prices. Sangwan (1989) in his study on seasonal variation in potato prices in important markets of the country for the periods 1963-1985 reported that the level of seasonal variations in the prices of potato was considerably lower in Delhi market than that of Furridabad, Meerut, Patna and Kanpur markets. This was largely due to lower harvest season prices in the producing areas than in the consumption center like Delhi. Sudish (1991) in his study on temporal and spatial variations in arrivals and prices of jowar and ragi in Karnataka for the period 1976-77 to 1988-89 found that the trend in arrivals of jowar was more or less constant in Belgaum and Gulbarga market, while Bellary market recorded a rapid increase in arrivals. The price trend in all the three markets were found to be positive. The seasonal variation in arrivals of jowar was more when compared to that in prices

of jowar for all three markets were more or less constant but positive. The seasonal variation in arrivals of ragi was more when compared to that in prices of ragi for Dawangere and Tumkur markets, while in Channagiri market, the seasonal variation in prices was more than the variation in arrivals of ragi. Nawadkar (1992) studied the trend in arrivals and prices of selected commodities in Gulkadi regulated market, Pune of Maharashtra state for the period 1983-84 to 1990-91. There was a wide fluctuation in the arrivals in the market which may be attributed to the decline in the area under the crop which resulted in low production. There was no specific trend in the arrivals of gram. The increasing trend of average price was observed in both pulses (gram and tur), more over the prices of tur had slightly declined during the year 198485. The remarkable positive change was observed in the arrivals of tur gram, tomato and onion, and prices of tur, gram, tomato, brinjal and onion. Mundinamani (1993) employed orthogonal polynomial regression technique to study the trend in arrivals and prices of oilseeds in Karnataka. In Bijapur and Jallikoti market, the mild fluctuation of the initial years in groundnut arrivals developed into a tremendous growth in later years. A continuous decline in safflower arrivals was observed in all the markets except Gadag and Gangavati. In case of safflowers, with few exceptions in initial years a continuous steep rise in arrivals and price was noticed in Gangavati and Raichur markets. As far as price trend was concerned, a continuous upword movement was observed in all the markets for all the crops. Singh et al. (1993) analysed the behaviour of market arrivals and prices of potato in Punjab. They reported that a rising trend and the trend coefficient of potato arrivals were significant during the post-harvest period. The prices occurred very low during the lean period. The indices of prices remained high and ranged widely mainly due to the seasonal and perishable nature of the crop. They further indicated that the potato prices depicted a cycle of three years. Sharma et al. (2000) studied the trends in area, revenue and expenditure on forests. It revealed that there has been a sharp reduction in the forest area in 1991 over 1979-80 in all the states. The results have further shown that fuel wood and bamboo were the major forest product produced. The growth in revenue was increased in all the states. In 1993-94 although both revenue and expenditure were increased, the later growth rate was much higher than the former. Ansari and Ahmed (2001) applied ARIMA model for trend series analysis of prices and industrialized countries export prices. The results of the estimated ARIMA equations implied that the information on the current periods tea price was sufficient to forecast the next period and the industrialized countries export prices can be forecasted from information in the prices of the previous two periods. They concluded from the fitted ARIMA model that autoregressive procedure generates both price and there was no influence of external factors. Guledgudda et al. (2002) studied the trend in world tea production and export. They reported that Indias share in the world tea production has slipped gradually from 38.12 % in 1960-61 to 28.83 % in 1990-91 and further marginally came down to 27.45 % in 1999-2000. Whereas its share in world tea exports has been similarly decreased gradually from 36.41 % in 1960-61 to 18.33 % in 1990-91 and further decreased to 17.86 % in 1998-99. Namasivayam and Paul (2004) estimated the trend in area, production and productivity of coconut in India. The entire analysis was done separately in three phases for the overall period under the study as 1977-78 to 1986-87 was I phase, 1987-88 to 1996-97 was II phase, 1997-98 to 2001-2002 was III phase. The trend in growth rate analysis reveals that the growth in area, production and productivity was observed in the first two periods while in the third productivity was negative. Shibu et al. (2004) studied the trend analysis of cashew in Kerala. In general, trend analysis based on index number and growth rate in area was positive for the entire period with stagnant production and declining productivity.

2.2

NORMAL PROTECTION COEFFICIENT

While analyzing the export growth and prices of turmeric in India, Ravindran and Aiyasamy (1982) indicated that the cyclical pattern of variations in prices. The study also revealed that the length of the export price cycle was varied from three to seven years. The export prices were studied for their relation with the domestic prices. The coefficient of correlation was 0.9473 and this close movement of export and domestic prices of turmeric explained the poor variation in the value of the variable Rt (ratio of export price Pe to domestic price Pd in year t) and consequently the correlation of export price of turmeric with its domestic prices. This indicated that the export price was exposed to international trade fluctuations. Anderson and Ahn (1984) examined the protection policy and changing advantage in Korean agriculture from the mid 1960s. The domestic resource cost methodology was used to measure the foreign exchange earnings foregone by keeping resources in rice production. They concluded that agricultural protection was unlikely to continue to achieve its objective of showing the decline in food self sufficiency and helping farmers to keep pace with urban incomes unless it was increased continually. Brorsen et al (1984) analyzed the relationship among weekly prices at Rotterdam, Netherlands for rice imported in to Europe from the United States, Thailand and Argentina. A theoretical model of price determination was developed to explain the hypothesized direction of dynamic influence. Causality tests among the price series were applied. The dynamics of price relationships were later analyzed using dynamic multipliers. Argentinean and US prices were found to move together. These two prices responded quickly (one to two weeks) to changes in Thailand prices. The Thailand prices were found to react slowly (taking 10 to 20 weeks) to changes in Argentinean and US prices. Senaur (1985) studied the protectionist rice price policy in Panama, where the domestic price was above the world market level. Although the producers were benefited by this policy, it imposed significant drain on consumers income, increased Government expenditures and affected economic efficiency. The policy recommendation was to bring domestic prices in line with the international level. Mishra (1986) evaluated protection versus under pricing of agriculture in India for two major cereals wheat and rice from 1955 to 1980. Nominal protection indices (NRD and NPC) were estimated for six time points at each quinauennium. Besides showing changes over time in the levels of protection or exploitation, the aim was to see whether some comparative statements vis-a-vis industrialized and industrializing countries could also be made. Canosanz (1987) discussed the impact of highly protectionist agricultural policies of developed countries upon the Colombian economy. International protection combines with the removal of protection from imports via policies biased towards consumer's competition within the country which were displacing production from areas where it had real comparative advantage. This led to imports of wheat and substitution of local products like maize and rice. Gulati (1987) attempted to quantify the degree of distortion in the trade pricing policies with regard to Indian seed cotton (kappas) during 1980s. The region and variety specific structure of incentives for cotton was estimated by adopting a standard methodology covering four major varieties of cotton, which dominate the cultivating regions of Maharashtra, Punjab, Gujarat and Andra Pradesh. The results in general indicated a situation of disprotection for the Indian cotton cultivators and suggested that Indian cotton is an efficient export crop as well as an efficient import substitute. Whitton (1987) reviewed the export policies of six major cotton-producing countries by dividing them as those likely to subsidize cotton and those potentially taxing it. China and USSR, the largest cotton producers in the world were found to pursue policies of both subsidization and taxation. None of the other countries found offering direct producer payments but all had some input subsidization. Producer's subsidy equivalents for India and Pakistan did not indicate subsidized cotton in either country. Negative taxes on producers, resulting from export control. substantially exceeded net transfer to producers from subsidized inputs.

Gulati et al (1990) studied the effective incentives for wheat cultivators in India by selecting four wheat growing states (Haryana, Madhya Pradesh, Punjab and Uttar Pradesh) under importable hypothesis. The NPCs for four states averaged for the period 1980-81 through 1986-87 were found to be 0.84, 0.75, 0.85 and 0.77 in the case of Haryana, Madhya Pradesh, Punjab and Uttar Pradesh respectively. These results indicated that wheat cultivators in India had been taxed on pricing front compared with imports. But under export competition hypothesis only one state namely, Punjab was taken for calculation of NPCs. It averaged 1.34, which implies that cultivators in Punjab state were protected. Gulati et al (1990a) determined the degree of distortion in the trade pricing policies with regard to Indian rice during 1980s. Six rice growing states (Andhra Pradesh, Bihar, Madhya Pradesh, Orissa, Punjab, and Uttar Pradesh) were selected under importable hypothesis and Punjab was selected for exportable hypothesis, where it was deemed to compete with Thailand rice. Under importable hypothesis, the results showed that the rice cultivators were taxed on the pricing front and under exportable hypothesis. Punjab rice cultivator seemed to have acquired protection only during 1985-86 and 1986-87 but the average situations for 1980's remained taxed. Gulati et al (1990b) worked out the protection coefficients for groundnut in India by selecting three different groundnut growing states under both import and export competition hypotheses. Domestic price of groundnut was about 50 per cent more than import price, which implied that groundnut received a significant degree of protection from the existing policies under import competition hypothesis. The NPCs of Gujarat, Andhra Pradesh and Tamil Nadu were 1.47, 1.50 and 1.53 under import competition hypothesis and 1.87, 1.96 and 1.95 under export competition hypothesis respectively, indicating the level of incentives significantly higher under export competition hypothesis than under import competition hypothesis. Indian export of groundnuts to hard currency areas had been a limited one in the 1980s. Valdes et al (1990) studied agricultural pricing policies in Chile for the 24 years period, 1960-84. Five products namely milk, beef, wheat, apples and grapes were examined for their protection. The study found wide variations in direct, normal and effective rates of protection for the products examined. There was consistent nominal protection for milk production. Nominal protection of wheat production was positive while apples and grapes experienced positive protection before 1975 and has a much greater impact on the structure of incentives than did agricultural policies. Gulati et al (1994) in their study of export competitiveness of selected agricultural commodities, identified the constraints in the export of fresh fruits, vegetables and processed fruits and vegetables. Canalization of onion through NAFED has led to loss of share in export market because of intervention of NAFED, whenever there is escalation of price in the domestic market. The infrastructure for storage, transport, internal as well as international was largely inadequate. The interest on export finance was high (13 per cent) and it should be brought down to nine per cent per annum. Institutions such as farmers-exporters cooperatives like Maha grapes and Maha mango was considered most useful in the export promotion of fruits and vegetables. This is essential to ensure good quality product as well as remunerative returns to the farmers. Rao (1995) analyzed the export competitiveness of Indian onions in major markets using constant market share model over a period, 1979-82 to 1989-92. The importing countries used for analysis were Malaysia, Singapore, Srilanka, UAE and the rest of the importing countries grouped as others. Onion exports to Malaysia were fairly competitive, wherein 26 per cent of total change in exports was due to competitiveness of our exports in that market. The UAE was the only country where India's onions were not at all competitive. Regarding onion exports to the world as a whole, only one per cent of the total change in exports was found to be due to competitive effect. In the study involving estimation of Nominal Protection Coefficients (NPCs) for DCH32 seed cotton in Karnataka for the period 1983-84 through 1991-92 under both exportable and importable hypothesis, Umapathi et al. (1995) indicated an overall situation of disprotection to the cotton cultivators of the area studied. The NPCs were found to be much below unity and implied that DCH-32 seed cotton would be an efficient export crop as well as

an efficient import substitute, but for the barriers that delink the domestic market from the world market. Reddy et al. (1998) analyzed export competitiveness of groundnut with particular reference to Karnataka using nominal protection coefficient technique under importable and exportable hypotheses. Results of the study showed that groundnut had been receiving significant protection by the then existing policies as indicated by coefficients greater than unity. Thus, groundnut is neither an efficient import substitute nor an exportable commodity, which should be a cause for concern as it was widely grown in dry land areas, where alternative profitable crops are few. Ravi and Reddy (1998) examined the export competitiveness of selected agricultural commodities with particular reference to Karnataka using nominal protection coefficient technique. Among the six commodities studied, Karnataka lacked comparative advantage in most of the crops except cotton. The exports potential of jowar, maize, and groundnut and sunflower were significantly low. Even though, Karnataka was the leading coffee exporting state in recent times, domestic market found to be more favourable compared to the export market. Unlike cereals and oilseeds, Karnataka had an absolute advantage in case of cotton export. Jha (2000) expressed that India had comparative advantage in producing large number of agricultural commodities due to lower resource costs. The comparative advantage was high for commercial crops like, cotton, tobacco, jute, spices tea and coffee. The country has also advantage in producing labour intensive crops like, rice. The country has however, no comparative advantage in producing coarse cereals like maize and sorghum. In Wheat, the country was at the margin. Mahesh (2000) studied the export competitiveness of Indian tea by estimating the NPC and DRC under both importable and exportable hypotheses during the year 1998-99. The results revealed that under importable hypothesis the NPC and DRC were 0.71 and 0.66 respectively. The NPC was below unity, which indicated that the domestic tea was an effective import substitute, where as the DRC was also less than one implying that the tea growers spend less than a rupee equivalent of foreign exchange on the production. Hence, it was profitable to use non-tradable inputs in the production of tea in India. Under exportable hypothesis, the NPC and DRC were 0.98 and 0.93 respectively. The NPC was less than unity which reveals that tea was competitive in the international market and it represents an effective export commodity where as DRC was also less than one implying its export competitiveness in the international market. Sudha (2000) worked out the DRC for rose cultivated in 38 hi-tech rose units located in Bangalore urban and Bangalore rural districts of Karnataka and adjoining Dharmapuri districts of Tamil Nadu during 1997-98. The results revealed that the DRC for the industry as a whole was 0.52, which reveals a high export competitiveness of hi-tech roses in the study area. The ORC ratio suggested the efficient use of resources by the rose cultivating hi-tech units. It was inferred that as long as the price of output and the proportion of the traded components of inputs remain at the present level, it is highly competitive to produce rose for export purpose. Structural change in exports Markovchain analysis could be employed to find the structural changes in any system though time can be measured in terms of single outcome variable by using transitional probability matrix which can predict the changes for future year also. Fialor (1985) analysed the market share of Ghanian cocoa exports for the period of 1951-81 using Markov chain model. He decomposed the total change in export in to the overall market share effect the direction of trade effect and the individual market effect. It was observed that there was an overall contraction in Ghannas cocoa export during this period to the tune of about 38,000 tonnes. Even though, there was an expansion in exports due to increase in overall market share effect due to convergence of increased world demand to the extent of about 2,26000 tonnes and another 15,000 tonnes but to the direction trade effect, yet the time through the individual market share effect was large 2,78,000 tonnes and this had resulted in the contamination of Ghannas export.

Srivastav and Ahmed (1986) analysed the direction of exports from India for the period 1960-61 to 1983-84. The countries such as USA, former USSR, UK, Japan and East West Germany had great share in India's export and import trade. Indias export to the above mentioned free major trading countries declined over the period of study. The UK no more remained as the principal destination of Indian trade as it was in the pre-independence period in 1983-84. USA emerged as one of over major trading partners. Jaykumar (1990) while analyzing the country wise foreign exchange realization by the silk sector revealed that developed mealets motably countries like Germany , USA, Japan and South Korea were India's major destinations. However, ten accounted for the bulk in India's exports, taking over 75% of the total export sales of products to various countries in 1988-89. Gemterea (1991) analysed the directions of trade using Markov Chain model. The share of Ethiopian coffee exports to USA drastically declined during 1979-1989. However, West German market indicated to be the potential market for Ethiopian coffee. Further, the low market share of Ethiopian coffee in USA, France, USSR and other countries diverted to West Germanys market. It was also projected that the market share of Ethiopian coffee exports to West Germany was increased to 32% by 2000 AD, mainly because of West Germanys preference for Ethiopian mild coffee. Veena (1992) analysed the direction of trade of Indian coffee exports using Markov chain model. It was observed that India could not retain its previous market share of USA, Netherlands, Yugoslavia and other important countries. However, the actual quality exported to all these countries had increased due to increased quantity of Indian coffee exports. India retained its market share to former West Germany, while USSR and Italy lost their share. Teromi and Ramanathan (1993) noticed significant changes in the direction of pepper exports from India for the period of 1975-90. It was observed that nearly 44 per cent of India's pepper exports were directed to former USSR, which constituted about 82 per cent of the total pepper imports of that country. On the other hand, India not only failed to increase its exports to USA in tandem with increased consumption in that country but also could not sustain the quantity exported in the past years. Instability in exports were low in case of former USSR, Italy and Canada and higher for Poland, USA and Czechoslovakia. Jalajakshi (19940) studied the pattern of India's shrimp exports between two periods, Period I covering 1970-1980 and period II covering 1980-1990. The export of foreign shrimp to Japan and USA and EEC were stabilized during II period over the I period. There was high variation with respect of shrimp exports to UK and EEC countries because of the preference of cold water shrimps in these countries. Nagaraja (1997) analysed the direction of trade of the Indian horticulture commodity exports by employing first order Markov process, which helped in identifying the gains and losses in export value. It revealed that the other fresh fruits and vegetables retained their chances of and garlic respectively. Where as grapes, onion and mango juice sustained their original share of 59.8 per cent and 19.4 per cent, respectively. Srinivasamurthy and Subramanyam (1999) analysed the direction of onion trade by using markov chain model during 1980-81 to 1944-95. The major gains among import of Indian onion over a period of time it was revealed that Malaysia had a transfer probability of 0.6459 from Saudi Arabia and 0.3488 from UAE, in addition to having high probability of retention of its own share. On the other hand, Saudi Arabia had zero probability of retention of own share of export of French onion which was likely to gain some extent from Bangladesh and other countries. Mahesh (2000) studied the structural changes in exports of Indian tea for the period 1979-80 to 1998-99 by employing the first order Markov chain model. The probability matrix indicated that the countries like United Kingdom, USSR, Iran, UAE, Saudi Arabia and other importing countries retained its previous shares by Indian tea while rest of the countries like Germany, Poland and USA could not retain their previous share of Indian tea imports.

Market integration
The market integration concept explains the relationship between two market that are spatially or temporally separated. A study on integration of different market can suggest to the producers to where, when and how much to sell, which inturn will helps in their production strategies and hence efficient resource allocation. Borsen et al. (1984) illustrated the use of univariate and multivariate time series analysis in the investigation of dynamic relationship among selected weekly import prices of rice of European community. The European community imported rice from United States. Bhatta and Bhat (1988) analysed the extent of price relationship of arecanut between selected markets of Sirsi and Manglore using the correlation co-efficient method. The results revealed that Manglore market was more efficient than Sirsi market. The commercial nature of the crop and its varied market behaviour was clear from the fact that there was a direct relationship between supply and Price. Indira (1988) estimated the extent of price relationship for coffee between three poor sale centers Bangalore, Coimbatore and Vijaywada in the same direction. The lagged Goss correlations of domestic prices and world prices of coffee for the period 1979 to 1999 indicated that the world price of coffee had a stronger influence on the domestic prices than that of world prices of coffee. Ahmed Zubaidi and Muzafar Shah (1994) examined the price efficiency in pepper market in Malaysia. Co-integration test of spatial price relationship were applied to weekly prices of black pepper and white pepper at 6 regional market, Malaysia using data for the period 1986 to 1991. The results revealed that the regional pepper markets in Sarawale were highly integrated. The price changes were fully and immediately passed on to other markets. The low transportation costs and risk associated with transportation explained the degree of co-integration. Saikat and Nair (1994) studied whether the movements in the international prices of Indian pepper had reflected the variations in prices to other exporting countries during the 1980s and also whether the domestic prices of pepper had moved synchronously with international prices. The results revealed that due to the open trade status for pepper, the price have moved synchronously indicating the integration of prices in the world pepper market. Hudson (1998) analysed the change in price behaviour of US catfish industries. Using monthly catfish price data, a co-integration analysis of prices showed that price behaviour has changed through time with catfish prices becoming integrated as the member of process has increased. Growth rates Rath (1980) examined the growth rate of agricultural production in India for the period 1955-1978. He observed the total agricultural production with an average growth rate of 2.48 % per annum during the period and the growth rate for cereal production was 2.70% per annum. Chengappa (1981) studied the growth rate of area, production and productivity of coffee in India. The linear model of the type 1/(t)=a+bt and exponential model of the type = 1/t=ab were used to work out the growth rate. The exponential function indicated a good fit of the annual compound growth rate of production with 45.68 % for arabica and 7.4 % for robusta, their combined growth rate being 6.1 per cent. Bandopadyaya (1982) analysed the growth rate of Indias share in world tea exports using the simple linear trend equation. The results showed that Indias share in total world export of tea has been consistently declining during the study period 1969 to 1978. One of the causes that contributed to this trend was sprout in demand for tea in domestic market due to population boom. Other associated problems were low productivity, high cost production, scarcity of suitable land and capital.

Raveendran and Aiyaswamy (1982) analysed the export growth and export prices of turmeric in India. They observed cyclic pattern of variation in prices with a length of three to seven years. The export prices were studied for their relation with the domestic prices and found that there was a very high correlation between export prices and domestic prices of turmeric. Obviously, it was confirmed the vulnerability of the latter due to the international price fluctuations. Dass et al. (1985) analysed the trends in coffee export in relation to general export from India for the period 1956-57 to 1982-83. The annual compound growth rate of export in general had fallen during the period 1972-73 to 1982-83 inspite of buoyant world demand and high domestic production. The share of coffee exports in total export value terms had increased in the periods 1956-57 to 1971-72 and 1972-73 to 1982-83. However, unit values, quantity and export value, recorded chronic instability in the same period. Failor (1985) studied the growth rate of area, production and export of world cocoa. He found a declining trend in acreages under cocoa for the world as a whole, but the total production had increased by 1.4% and productivity by 2.3% per annum. The low growth rate of export trade in cocoa was declining. George and Mukharjee (1986) analysed the changes in the pattern of rice in Kerala over and across time period (prior to the mid 1970s) across seasons (autumn, winter and summer) and across space (a major rice growing district). The growth rate of area, yield and production indicated considerable variation across districts over season and over time, maximum during summer. Praksh (1986) evaluated the growth rates of production, consumption and export of Indian coffee using a modified exponential growth functions of the form log 1/t=a+bt+et2. The production of coffee in India increased by 4.51 per cent per annum during 1962-63 to 198182. The growth rate of consumption during the same period worked out to be 1.69 per cent annum. However, export registered a significant increase during the study period recording a compound growth rate of 6.94% per annum. Achoth et al. (1988) analyzed the available data to document the changes that have occurred in pulses production in Karnataka and also identified the important components of viability during and after the green revolution. The study revealed that production of pulses in Karnataka had registered significant increase during the decade following the green revolution period. This increase was contributed by the increase in production in Gulbarga district. The instability for the state as a whole had increased in the decade after the green revolution. Most of this instability was contributed by minor pulses growing districts. The instability induced by change in the area variances was the single largest factor which increased instability of pulses production in the state. Indira (1988) studied the growth in internal release of Indian coffee in comparison to the growth rate in production and exports. The compound growth rates were calculated for two time periods, period-I ranges from 1953 to 1969 and period-II for 1969-81. Between 195369, when production increased at an annual rate of 6.16 per cent, consumption increased at 3.13 per cent per annum, while export increased at the rate of 9.8 per cent. The annual rate of increase in production, internal increase in export for the second period was much smaller, relative to the first period. The production increased at an annual growth rate of 4.32 per cent while internal release and exports recoded a growth rate of 2.44 per cent and 5.79 per cent, respectively. For the entire period, these rates were 4.38 per cent, 2.34 per cent and 7.3 per cent in the order. Thakur et al. (1988) estimated the growth rate of area, production and productivity of oil seeds in Bihar over two periods. The first period covered two years (1961-62 to 1970-71) proceeding the green revolution and the second period had thirteen years after the green revolution. The production and productivity of oil in general, increased substantially in the part of green revolution period. The area under oil seeds registered a negative growth rate in both the periods with the exception of linseed in post green revolution period. Gemtessa ()1991) compared the performance of Ethiopian coffee exports during the pre-revolution and post revolution periods. The exponential growth model of the form 1/t=

abteu was employed. The results showed that exports growth in the pre revolution period was lower 1.51 % when compared to the post revolution period 1.77% Naik and Mohanty (1991) studied the trend in area, production and productivity of groundnut in different districts of Orissa. The growth rates of area and production of groundnut during the period 1970-71 to 1987-88 were statistically high significant in all the districts except Korapet. Even though, groundnut yield in Orissa was highest in India during 1985-86 to 1987-88, the growth rate of yield over the years was negative and non-significant. Veena (1992) analysed the growth of Indian coffee exports for the period 1965-90 using the exponential function of the form Y=abt. She found that exports export of plantation type coffee exhibited a compound growth rate of 3.6 per cent per annum. Robusta exports registered a marked compound growth of 10 per cent. Jeromi and Ramanathan (1993) examined the growth and instability in world pepper markets for the period 1975 to 1990. An exponential model of the type 1/t=aebt (nYt=-----) was fitted to estimate the growth rate of pepper trade, and the instability index was calculated using the residuals of the exponential trend equation. Among the exporting countries, Srilanka recorded the highest annual compound growth rate of 24.59 per cent with a high degree of instability. This was mainly due to its low base in the initial year. The positive and statically significant growth rate and stable index was recorded in case of India. In contrast, the growth rate of pepper imports ranged from a negative level of 2.56 per cent for Argentina to a high and positive level of 11.64 per cent for Saudi Arabia. The instability indices varied between 0.07 (Japan) to 0.55 (Egypt). Lal et al. (1994) analysed the growth rates of area, production and productivity of rice, wheat and maize in Bihar state, over the period 1951-52 to 1987-88, which uncompared the pre and post-green revolution periods. The growth rate of production was significant for all crops due to the significant growth in productivity. The contribution of area was non significant for rice. Jayalaxmi (1994) analysed the growth in export of shrimps from India for the period t 1966-91. The exponential model of the type 1/t=ab was used to workout the growth rates. Foreign shrimps export recorded a positive growth rate was due to high demand in importing countries. The negative growth rate was observed for dried and canned shrimps which attributed to the dealing demand in the importing countries and increased cost production in India. Mamatha (1995) estimated the growth rate of production and export of selected spices for the period from 1970-71 to 1991-92. The species considered were pepper, chillies, turmeric and ginger. She found that positive growth rate in respect of production and export of the selected spices, which was due to the increased domestic production and demand for these species in the international market. The increased domestic production and exports were attributed to the several measures taken by the spice board such as improved method of production, distance for the export of spices, setting up facilities for upgrading quality and technical advice on scientific post harvest operation and procuring. Maheshwari (1996) examined the growth in area, production and yield of food grains, rice, sorghum, milk, pigeon pea and groundnut in Karnataka state since 1955. The study period was divided into three sub periods such as the pre-green revolution period (1955 to 1966-67) the early green revolution period (1967-68 to 1979-80) and the late phase of green revolution (1980-81 to 1989-90) by using the kinked exponent estimate of rates of growth to arrive at a more complete picture of trends. It was found that the increased yield brought out by high yielding varieties (HYV) seeds, which were not fully revolutionary. In period-I, irrigation was responsible for growth, while in period- II, it was mainly due to HYV seeds and chemical fertilizers. In period-III, there was a stagnation in the growth rate of food grains mainly due to continuous rainfall in that period. Shende et al. (1999) studied the export performance of India in tea, coffee and tobacco. The growth rate for tea and tobacco were negative for India of 0.28 per cent per annum and 1.09 per cent per annum respectively, which shows drastic fall in export from India. Coffee noted very high growth rate of 6.08% per annum for India's value of export and

tobacco was 2.18% per annum. Thus, the coffee and tea showed a significant growth in India's value of export as compared to tobacco. Anaathi (2000) analysed the growth of area, production, productivity and export of Indian non-basmati rice. The growth rates were calculated by sub-dividing the study period into 1949-50 to 1969-70 as first period and 1970-71 and 1997-98 as second period. The area, production and productivity showed positive trend for the export during the study period 198081 to 1998-99 for basmati and non basmati rice. The growth rate was also positive and significant. Ashalata (2000) analysed the growth rate of area, production, productivity and export of cashew kernel, cashew nut shell liquid, imports of raw cashew nuts and unit value of exports of cashew. The study was carried out for the period of 1956-57 to 1998-99. The growth rates were studied in two periods, period-I covered 1956-57 to 1970-71 and period-II covered 1970-71 to 1998-99. It was observed that the growth rate of area, production, productivity, kernel export, raw cashew import, cashew nut shell liquid value and cashew nut shell liquids unit value of exports were showing positive trend but the cashew nut shell liquid quantity showed negative growth and non-significant. Sujatha et al. (2003) indicated that the rate of growth in quantity and value of exports (7.92% and 12.26% respectively) was more during post-WTO period in case of fresh mangoes compared to pre-WTO period (6.81% and 11.62% respectively). At an overall level, India's mango export increased by 7.71% and 9.35% per annum with respect to quantity and export earning. Thus, the impact of WTO on mango export was non significant. Hyma Jyothi (2003) studied that the quantity of onion and potato exports from India they registered a positive and significant growth rate of 6.27 per cent and 4.38 per cent per annum. Export earnings and unit value realization exhibited significant positive growth rate of 16.70 per cent, each for onion and potato, respectively. Velavan (2004) studied the growth rate of export and import of cashew in India and the world. It was observed that import growth rate was 10.140 per cent per annum and the export growth rate was 8.88 per cent per annum. The import and export growth rate was lower in post-liberalization period than the pre liberalization period. This trend might be due to the composition from the other nuts and reduction in the yield of cashew in the major exporting countries. The import growth rate (20.89%) of raw nuts in India was higher than the export growth rate of produced nuts (6.31%). This was due to large scale dependence of raw materials to meet the domestic and export demand by India.

III. METHODOLOGY
This Chapter covers the following aspects: 3.1 Study area 3.2 Data base 3.3 Analytical techniques.

3.1

STUDY AREA

In India the area suitable for cultivation of ginger is scattered more towards South and North Eastern States namely Kerala, Meghalaya, Arunachal Pradesh, Orissa and West Bengal. Kerala State ranks first in area and production, and it contributes about 20% of the total Production of the country. Hence South Indian states such as Karnataka, Kerala and Tamilnadu markets were purposively selected to study the Market integration in the export of ginger from cochin port. For studying the competitiveness of Indian ginger, direction of trade and the export potential. The total area of ginger in India was about 83,220 ha and the production was 281,160 tones during 2002 and this production mainly depends on the Climate, soil condition and management aspects in different states.

3.2

DATA BASE
The required data for the present study were collected from various sources such as,

1. Spice Board in Cochin and Kerala. 2. Indian Institute of Spice Research (IISR),Appangala,Kodagu. 3. DGCIS, Kolkatta 4. Various issues of spice India. For studying the price trend of ginger in both Domestic and International markets, the price data of Domestic wholesale Market (Cochin) and International Markets (New York) were collected for the period 1985-86 to 2003-04 to examine the growth pattern, competitiveness and trade direction of exports. The data regarding country-wise export of ginger from India was collected for the period 1987-88 to 2003- 04, based on the availability of data. The importing countries were selected based on highest quantity imported that includes USA, Saudi Arabia, Pakistan, Bangladesh and Y A R.

Analytical Tools and Techniques,

The data collected from secondary sources were subjected to appropriate analytical techniques in order to arrive at a meaningful conclusion. The different analytical techniques used in the study were as follows, 3.3.1 Trend analysis 3.3.2 Nominal protection coefficient 3.3.3 Markov chain analysis 3.3.4 Simple correlation analysis 3.3.5 Growth rate analysis

3.3.1 Trend analysis

The trend in domestic prices and international prices for ginger were computed for the time series data of 1985-2004. Yt= a+bT+cT +dT +et. Wherein Yt a T = price = intercept = time period
2 3

Fig.1 : Graphical representation of the study area.

Kerala

Meghalaya

Arunachal Pradesh

Orissa

Mizoran

West Bengal

Others

19 29

12

12 5 17

Fig. 2 : Statewise area udner ginger

Fig.2 : Statewise area under ginger

Kerala

Meghalaya

Arunachal Pradesh

Orissa

Mizoran

West Bengal

Others

25

19

7 8 10 12

19

Fig. 3 : State wise production of ginger

Fig.3 : Statewise production of ginger.

b,c,d = partial regression et = Error term

3.3.2 Nominal Protection Coefficient

Nominal protection coefficient were computed (Ashalatha 2000) to determine the extent of competitive advantage enjoyed by the commodity in the context of free trade. The coefficient shed light on whether a country has comparative advantage in the export of that commodity in a free trade scenario or not. Nominal protection coefficient (NPC) is defined as the ratio of the domestic price to the world reference price of the commodity under consideration. Symbolically, NPC=Pd / Pb Where, Pd Domestic whole sale price of the commodity Pb World Reference price of the commodity That is what the farmers would have received in case of free trade. If Nominal protection coefficient is greater than one, then the commodity is protected, compared to the situation which would prevail under free trade and if it is less than one the commodity is disprotected.

3.3.3 Markov chain analysis

The trade direction of Indian exports was analyzed using the first order markov chain approach (Jayesh. T. 2001), central to markov chain analysis is the estimation of the transitional probability matrix P. The elements Pij of the matrix P indicate the probability that exports share of the country will be retained. Hence, an examination of the diagonal elements indicates the loyalty of an importing country to a particular countrys exports. In the context of the current application, five major importing countries of ginger were considered. The average exports to a particular country were also considered. The average exports to a particular country was considered to be a random variable which depends only on the past export to that country, which can be denoted algebraically as Ejt=
r i=1 Eit-1Pij+ejt

- - - - - - - - - - - -(1)
th

Where as, Ejt - exports from India during the year t to j country
th th

Eit-1 - export to ith country during the year t-1 Pij - the probability that exports will shift from i country to j country ejt - the term which is statistically independent of Eit-1 and r - the number of importing countries t -number of years considered for the analysis The transitional probabilities Pij can be arranged in a (c*r) matrix have the following propertie 0Pij 1
n i=1Pij=1

for all I,

Thus, the expected exports share of each country during period t were obtained by multiplying the exports to these countries in the previous period (t-1) with the transitional probability matrix. There are several approaches to estimate the transitional probabilities of the Markov chain model such as unweighed restricted least squares, weighed restricted least squares, Bayesian maximum likelihood, unrestricted least squares etc. In the present study, Maximum Absolute Deviation(MAD) estimation procedure was employed to estimate the transitional probabilities which minimize the sum of absolute deviations. The conventional linear programming techniques was used. As this satisfies the properties of transitional probabilities of non negativity restriction and row sum constraints in estimation.

The linear programming formulation is stated as Min op*+Ie- - - - - - - - - - - - - - - - - ------ (3) Subject to XP*+v=y - - - - - - - - - - - - ----------------(4) GP*=I - - - - - - - - - - - - - - - - - - ----------(5) P*0 - - - - - - - - - - - - - - - - - - - - --------(6) Where, P*- a vector of probabilities Pij 0 a vector of zero I - an appropriately dimensional vector of areas e - a vector of absolute error ( U ) y - the vector of exports to each country x - a block diagonal matrix of lagged values of y and v is the vector of error G- a grouping matrix to add the row elements of P arranged in P* to unity Using the estimated transitional, the export of ginger to various destinations were predicted by multiplying the same with the respective shares of base year. The export shares of Indian ginger to different countries were predicted for different time periods by using n-step transitional probabilities.

3.4

COMPOUND GROWTH RATE

Yt= ABtevt

To compute compound growth rate of area, production and productivity the following form of regression equation was used. Where, Yt=data on area, production and productivity in year t A= intercept indicating Y in base period (t-o). T= time period Vt=error term B=(1+g) G = compound growth rate to be estimated. The equation was converted into logarithmic form in order to facilitate the use of linear regression. Taking logarithms on both sides of the equation, LnY= lnA+t(lnB) +lnVt This has the following form Qt=a+bt+Vt Where, Qt= LnYt a=LnA b=lnB Vt=lnVt The values of a and b were estimated by using ordinary least square estimation techniques. Later the original A and B parameters in equation were obtained by taking antilogarithm of a and b values . Average annual compound growth rate was calculated as G = (Antilog b-1) x 100

IV. RESULTS
In consistence with the objectives of the study, the data collected from different sources are presented under the following headings. 4.1 Trends in Domestic prices and International prices. 4.1.1 Trends in Domestic prices 4.1.2 Trends in International prices 4.2 4.3 4.4 Competitiveness of ginger export from India Direction of trade of ginger export from India Growth analysis of ginger area, production, exports and export value for pre and post WTO 4.4.1 Growth analysis of area and production for pre and post WTO 4.4.2 Growth analysis of export quantity and export value for pre and post WTO 4.5 Spatial integration of domestic wholesale markets.

4.1

TRENDS IN DOMESTIC PRICES AND INTERNATIONAL PRICES

The trend equations were fitted to assess the domestic and international prices. Depending upon its better fit, the trends and the results are assessed and presented under different categories namely trends in domestic prices and trends in international prices.

4.1.1 Trends in domestic prices

To assess the trends in domestic prices and international prices, the data over the period from 1985 to 2005 were considered. By dividing into three phases, that is from 19851990 as I-phase, 1991-2000 as II-phase and 2000-2005 as III-phase. It could be seen from Table 4.1 that in the initial phase (1985-1990) the domestic price of Cochin ginger was found to be decreasing significantly and in the II-phase (19912000) it started increasing, while in the later phase (2000-2004) the prices were again decreased significantly. The function was found to be significant at one percent level.

4.1.2

Trends in International prices

From Table 4.1 it was revealed that the international prices of Cochin ginger decreased in I-phase (1985-1990) then it started increasing in II-phase and later decreased in III-phase. These results were found significant at one percent level.

4.2

COMPETITIVENESS OF GINGER EXPORT FROM INDIA

The values of NPC for Indian ginger are presented in Table 4.2. The results of the NPC values for the period 1985-2004 indicated that the coefficients were less than one for all the years. The average NPC value for 20 years indicated that the unit price of the Indian ginger in the Cochin wholesale market was not much competitive in the international market. Where as the average NPC value over 20 years for domestic market price was 0.70 indicated the moderate competitiveness in the international market.

4.3 DIRECTION OF TRADE OF GINGER EXPORT FROM INDIA

The countries considered for the analysis of ginger exports from India were Pakistan, Bangladesh, USA, UAE and Saudi Arabia. The remaining importing countries were grouped under others. The transitional probability matrix of ginger trade is presented in Table 4.3. It could be seen from the Table that India could retain 63 per cent of its previous ginger exports to USA The USAs share was lost to the tunes of 21 per cent to Pakistan and 16 per cent to UAE. However gained 38 per cent market share from UAE followed by three percent market share of Saudi Arabia

Table 4.1 : Trends in Domestic Prices and International Prices

Sl. No

Trends

Intercept

T1

T2

T3

R square

1.

Domestic prices

2848.9

-733.09**

123.09*

-4.0546*

0.752

16.1683*

2.

International prices

4347.8

-1044.8NS

166.96**

-5.4013**

0.791

20.23.8*

* Significant at 5%, ** Significant at 1%

Table 4.2 : National protection coefficient Year 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 Domestic price (Rs/q) 2448 1488 1108 1660 1672 2258 2829 2492 2616 2913 4921 6425 4964 5037 5675 7527 6348 3756 4096 6856 International price (Rs/q) 4566 2113.1 1640 2606 2961.2 2891 3502 3703 4381 4553 5455 9198 7183 7194 7416.6 8490.2 9639 6098 5854.2 9175.5 NPC 0.62 0.7 0.68 0.64 0.56 0.78 0.8 0.67 0.59 0.64 0.9 0.69 0.69 0.7 0.77 0.89 0.66 0.61 0.69 0.74

Table 4.3 : Transitional Probability Matrix Of Indian Ginger Export

Countries

USA

Saudi Arabia

UAE

Pakistan

Bangladesh

Others

USA

0.63

0.16

0.21

Saudi Arabia

0.03

0.69

0.26

0.26

0.03

UAE

0.38

0.28

0.24

Pakistan

0.19

0.19

0.02

0.09

Bangladesh

0.10

0.10

0.08

0.58

0.15

Others

0.07

0.93

Increase of Saudi Arabia, it could retain 69 per cent of its import share from India and it lost 26 per cent of its market share from UAE followed by USA and Bangladesh (3% each). However, it gained 19 per cent from Pakistan and 10 per cent from Bangladesh. India retains seventy percent of its previous market share to Pakistan and it lost nineteen percent from Saudi Arabia and followed by Bangladesh (9%) and UAE (2%), but it gained (21%) from USA, (9%) from Bangladesh and (2%) from UAE, however India retains (58%)of its market share to Bangladesh it lost (15%) to other countries and it gains (9%) from Pakistan and (3%) from Saudi Arabia, and (7%)from other countries. UAE lost (38%) to USA and remaining (24%) lost to other countries and it gained (26%) from Saudi Arabia and (16%) from USA.

4.4 GROWTH ANALYSIS OF GINGER AREA, PRODUCTION, EXPORT QUANTITY AND EXPORT VALUES FOR PRE AND POST-WTO PERIOD
4.4.1 Compound growth rates of area and production of ginger in India were worked out for pre and post-WTO period and the results are presented in Tables
4.4 and 4.5 From Table 4.4 it was noticed that during Pre-WTO (1985-86 to 1994-95) period, the area under ginger was increased at 0.73 percent per annum and the production was increased at 2.07 percent. Whereas during post-WTO period the growth rate for area and production was increased at the rate of 1.356 per cent and 1.859 per cent per annum respectively.

4.4.2 Growth rate of Export quantity and value of ginger for pre and post-WTO period.
The growth rate of export quantity and value were also calculated for both pre and post-WTO period and the results are presented in tables 4.6 and 4.7. The results showed that

Table 4.4 : Growth rate of Area and Production of Ginger in India for period. Year 1958-86 1986-87 1987-88 1988-89 1989-90 1990-91 1991-92 1992-93 1993-94 1994-95 CGR Area(ha) 53520 52630 54240 51870 53560 53930 59830 59870 60580 61090 0.73

Pre-Liberalization

Production(tonnes) 138020 136010 142840 152120 156120 153450 176950 201630 186200 197650 2.017

Table 4.5 : Growth rate of Area and Production of Ginger in India for period.

post-Liberalization

Year 1995-96 1996-97 1997-98 1998-99 1999-2000 2000-01 2001-02 2002-03 2003-04 2004-05 CGR

Area(ha) 66890 70290 75570 77830 77500 83420 84570 85930 87450 89530 1.356

Production(tonnes) 219300 232510 252110 265290 281530 303420 317860 307370 309870 319360 1.859

Table 4.6 : Growth rate of Export quantity and Export value of Ginger in India for PreLiberalization period. Export value lakh) 1872.76 1089.35 571.16 488.99 940.82 1262.44 1175.79 2188.1 1687.37 2478.12 4.088 (Rs.

Year

Export quantity (tonnes)

1958-86 1986-87 1987-88 1988-89 1989-90 1990-91 1991-92 1992-93 1993-94 1994-95 CGR

7329 6816 4843 2628 6368 8139 6555 14259 9825 18442 5.197

Table 4.7 : Growth rate of Export quantity and Export value of Ginger in India for postLiberalization period Export value lakh) 1673.03 3892.13 5924.41 7268.73 4058.32 3253.55 2652.06 2311.47 2396.59 2340.5 -2.167 (Rs.

Year

Export quantity (tonnes)

1995-96 1996-97 1997-98 1998-99 1999-2000 2000-01 2001-02 2002-03 2003-04 2004-05 CGR

12022 18483 29737 28268 8683 8923 6288 6464 8461 5000 -6.48

] Table 4.8 : Correlation

Bangalore Bangalore Chennai Trivendrum 1 0.423** 0.905**

Chennai

Trivendrum

1 0.6** 1

** - Significant at 1%

during Pre-WTO period the export of ginger was increased at an annual rate of 5.197 percent and the value was decreased at 4.088 percent annually. Whereas during post-WTO period export quantity of ginger decreased with an annual rate of 6.48 percent and the export value was also decreased with an annual rate of 2.167 percent per annum

4.5 SPATIAL INTEGRATION OF DOMESTIC WHOLESALE PRICES

The wholesale prices of ginger in important markets of South India were collected and correlated to know the clear picture of the extent of market price integration. The correlation coefficient obtained from the results are presented in table 4.8 for three markets viz. Bangalore in Karnataka, Chennai in Tamil Nadu and Trivendrum in Kerala. The coefficients represents the degree of correlations of one market with other market even if there was spatial variability. It was observed from the table that the wholesale prices in Bangalore and Chennai markets had correlation coefficient of 0.423, which implies that there was no association in the wholesale prices of ginger between these markets. However, the Chennai and Trivendrum markets had a fair association in the wholesale prices of ginger between the two markets. However, Trivendrum and Bangalore markets were highly correlated.

V. DISCUSSION
The results of the investigation mentioned in the previous chapter are discussed in detail in this chapter under the following heads. It is hoped, it would help in identifying some policy measures, which would be adopted by the government to overcome constraints identified by this study. 5.1 Trends in domestic prices and international prices of ginger. 5.2 Competitiveness of ginger from India 5.3 Direction of trade of ginger exports from India 5.4 Growth analysis of ginger area, production, export quantity and export value for pre and post WTO period 5.4.1 Growth analysis of area and production in pre and post WTO period 5.4.2 Growth analysis of export quantity and export value in pre and post WTO period 5.5 Spatial integration of domestic wholesale markets

5.1 TRENDS IN DOMESTIC PRICES AND INTERNATIONAL PRICES OF GINGER

Trends in domestic prices and international prices of ginger were worked out by fitting appropriate trend equations and are presented in the tables.

5.1.1 Trends in domestic prices

Prices of any commodity basically depends upon supply and demand, hence ginger is not an exception. In the pre-WTO period, prices in domestic wholesale market were low and the production was increased at the rate of 2.01 per cent per annum. This is the reason, for the export quantity to increase during liberalization but later the prices started fluctuating in domestic market due to increased production and there were no buyers in the market because of low demand. These empirical results are on par with the theoretical law of supply and demand. A steep rise in price of ginger during 2004 has motivated the farmers to grow ginger leading to fall in prices and this resulted in over production outweighing the demand. As a result of this again there was fall in the supply of ginger in the market during 2005 leading to increase in prices. These fluctuations could be seen in fig (4.1a) and in table 4.1

5.1.2 Trends in international price

Excess supply brings down ginger prices in international market also. During preliberalization (I-phase) period, the international prices were low and later in II phase, it started increasing due to high demand for ginger in the international market. This was mainly due to the fact that there was a substantial shift towards natural products by the consumers and the firms have started foraying into the value added sector in the west. The major value added forms of ginger were ginger oil, ginger oleoresin, curry powder, ginger mixture and special extracts and blends. During 2000-02, due to lower production of fresh ginger in north eastern states and less dry ginger production in southern states, the major share of available ginger was absorbed in the domestic market and hence the prices have gone up. Under the WTO-regime, countries hitherto inactive in ginger trade had started emerging as producers, posing a substantial threat to traditional exporters like India. The new entrants had no domestic market, which compelled them to push their produce at cost price or even below it. These reasons led to the price fluctuations in the international market.

5.2 TO ANALYSE THE COMPETITIVENESS OF GINGER FROM INDIA

As per the theory of comparative advantage, a particular nation can enhance the resource use efficiency and there by the net welfare by producing and exporting commodities in which it has greater comparative advantage than others, so as to maximize its exports revenue. The Nominal Protection Coefficient (NPC) technique explains the comparative advantage enjoyed by the commodity in the context of free trade. The countries like China, Jamica and Nigeria took up ginger cultivation on commercial scale and started exporting. Their contribution to the International market increased and simultaneously India's share started declining. Thus, the failure of market and comparatively high price enables Indian ginger to became competitive in international market as compared to ginger from China. Mean while there was higher domestic consumption often leads to the reduction in quantity available for exports, and the major competitors like China and Nigeria supply their produce at much lower prices than ours in the international markets. Because of these India lost the supremacy in export, though India had been traditionally the largest supplier of ginger to West Asian countries. In the period April to February 2005, Nigeria was offering ginger at $650-$750 a tonne and China was quoting $ 1100 a tonne, as against the Indian price of $1400 a tonne. As a result of this India lost its major share in ginger exports to Nigeria and China, respectively.

5.3 DIRECTION OF TRADE OF GINGER EXPORTS FROM INDIA

International markets for all commodities were changing fast because of globalization and liberalization. The changes are continuously taking place, it would be of interest to document the changes, which perhaps aid in the export promotion policies. Though, it would be difficult to pinpoint the nature of these changes and its direction, Markov chain analysis provides a probability approach in broadly unraveling these changes. Estimation of transitional probability matrix is central to Markov chain analysis. It indicates the direction of the changes, which help to decide the strategy and promotional polices to retain sales or increase sales in a particular market. Examining the Markov chain analysis, the direction of trade in ginger export from India was studied through the probability of market share retention and gain or loss based on the transitional probability matrix presented in table 4.3. It was seen from the table that USA was the stable importer of Indian ginger even though the quantity imported by USA was affected by the competition from Pakistan (21%) and by UAE (0.16%). But it has gained considerable share from UAE (38%). However, in future, its share might be reduced from the total ginger traded from India. The quantity may vary according to the population based on the medicinal requirement and culinary requirement of ginger in USA. Saudi Arabia was found to be a stable importer of Indian ginger because it retained its original share of around 69% and it lost major share (26%) from UAE and meager quantities to Bangladesh and USA respectively and also gained meager quantities from Pakistan and UAE. This relation may be because of the ethnic population as well as the preference of ginger for the culinary purpose. In case of Pakistan, it was a more stable importer than other countries, gained more market share from USA. Other countries have not affected its market share because of improved quality of ginger supplied to these countries. In case of Bangladesh, it has retained its 58 per cent market share and seven per cent of its market share was gained from other countries and nine per cent from Pakistan.

The export of Indian ginger to Bangladesh will vary accordingly with respect to time and severe competition between other producing countries

5.4 GROWTH ANALYSIS OF GINGER AREA, PRODUCTION, EXPORT QUANTITY AND EXPORT VALUE FOR PRE AND POST WTO PERIOD
5.4.1 Growth analysis of area and production for pre and post WTO
Compound growth rate of area and production of ginger in India showed the growth in area during the period under consideration with positive and significant growth rate. Therefore, the area under ginger was increased at the arte of 0.73 per cent per annum and production at the rate of 2.02 per cent per annum during pre-WTO period. During the postWTO period, the growth rate for area and production was increased at the rate of 1.35 per cent per annum. The variation in growth rate of production between post-WTO period was due to the protocols developed by the board for the multiplication of ginger using the tissue culture route. Advance technologies have ensured genetic purity and the selection of the appropriate time for planting as demanded by the market led to the increase in productivity. As the prices shot up in international market, after WTO, the farmers who had abandoned to take up the cultivation in Karnataka and Kerala were now re-entered by the virtue of the advances in technology and trade liberalization.

5.4.2 Growth analysis of export quantity and export values for pre and post WTO
The growth of ginger export in terms of quantity and value are given in table 4.6. The growth rate were calculated for both pre and post-WTO periods. They were increased at the rate of 5.2 per cent per annum and 4.09 per cent per annum respectively. This was observed because India was the most stable exporter of ginger to the West Asian countries and the crop failure in China was the major reason for increased demand for Indian ginger in the international market. The quantity of ginger exports increased mainly due to changes in composition and it has been exporting large quantities of fresh ginger. India witnessed 36 years of successful increase in ginger export earnings. This substantial increase in the export earnings of ginger was partially due to increase in unit value realization. Inspite of fluctuation in the unit values of ginger, export was increasing at 4.08% per annum. During the post-WTO period, the export quantities were decreased at the rate of 6.48 per cent per annum mainly because in the international market the demand was primarily for Cochin ginger, which fetched a premium price for its quality. After liberalization, there was high competition from China and Nigeria and hence the Indian ginger lost its market share, China had bumper crop and Indian exports were meager. Similarly, the export earning were also fluctuated due to the devaluation of currency and also due to the price competition faced by other countries. The growth rate observed was negative of -2.17% per annum.

5.5

SPATIAL INTEGRATION OF DOMESTIC WHOLESALE MARKETS

An attempt was made to study the extent of market price integration between the selected markets of Keral, Karnataka and Tamil Nadu for ginger. The simple correlation technique was used to find out the integration between the selected market prices. The results of correlation analysis revealed that the selected ginger markets in the three selected states were well integrated i.e. the price change in one market was fully and immediately passed on to the other markets. The high degree of integration may be due to the fact that all the selected markets were well connected by rail and road transport. However,

the integration between the market prices of Bangalore-Trivendrum and Chennai-Trivendrum were found to be marginally more as compared to that of the market pair of ChennaiBangalore. This might be due to the fact that more than 19 per cent of the ginger production was from Kerala. The prices prevailing in Kerala markets (i.e. Trivendrum) had greater influence on other states.

VI. SUMMARY AND POLICY IMPLICATION

India is rightly called as spice bowl of the world for its production of variety and superior quality of spices. Growing spices for various purposes has been famous since ancient times. There are records about various spices and its properties in the Vedas as early as 6000BC. India is well known for the trade since the exploration of sea routes. All these attracted the foreigners to India and this is the key reason India was invaded by the European countries and was imperialized. To such an extent India is famous for the spices. According to the Bureau of Indian Standards (BIS), 63 spices are grown in India. The spices are grown through out the country from tropical to temperate climate. India has highest number of spice varieties in the world. Among the spices, ginger is one of the mainstay in Indian spice account, which has been used for flavoring and medicinal purposes. Ginger occupies fourth position among the spices produced in India. In the area of export, ginger occupies fifth position in terms of quality and sixth position in export earnings among the spices. Ginger (Zingiber officinale roscoe L.) is a tropical perennial herb of the Zingiberaceae family. Elongated, curping, multi branched irregular, fleshy and pungent, Originated in tropical South East Asia. Ginger is an important spice grown in India and it used as taste marker, flavorant, appetizer and in drugs, in fresh, dried or powdered form. India has predominant position in ginger, contributing about 36.5 per cent to the total world production. The main competitors to India are China, Indonesia and Thailand. The main importers are Pakistan, Saudi Arbia, USA and Netherlands. India with the production of 2.3 lakh tonnes of ginger is the largest producer of ginger in the world followed by China. In India, Kerala had highest area and production followed by Meghalaya and Arunachal Pradesh respectively. India has an excellent research and developmental support. The Indian Council of Agricultural Research with All India coordinated Research Project on spices, has the responsibility of providing research support. Besides, research on post-harvest management and value addition have been done in the laboratories of CSIR. Taking into consideration the growing demand for the commodity in the domestic as well as export market, Indian ginger or Cochin ginger is considered as one of the best in the world. Export of ginger showed a highly fluctuating trend during the last 40 years. Exports, which needs critical anlysis, has been done mainly to Pakistan, Bangladesh, Saudi Arabia, UAE etc. Marketing system operating currently do not provide remunerative prices to the farmers, who have largely to suffer in the season of harvesting, storage and credit support against the produce would enable the farmers to get better return which has to be integrated with grading and value addition. The specific objectives of the investigation were 1. To study the trends in domestic and international prices of ginger. 2. To study the competitiveness of Indian ginger. 3. To analyse the direction of trade of ginger export. 4. To study the impact of withdrawal of freight subsidies on exports. 5. To study the spatial integration of domestic wholesale market in South India. Methodology The study area is composes the whole country. India possesses the most congenial soil, climate and other geographical conditions which are necessary for the best performance

of ginger crop. Kerala is the largest producer of ginger accounting for 19 per cent of the India's total output. Ginger is also cultivated in Karnataka. The data pertaining to the various aspects under study were collected from the secondary sources namely Directorate of Arecant and spices development, Calicut, Kerala. Spices Board, Cochin, Kerala. Indian Institute of species Research Calicut, Kerala. Trend analysis was used to study the trend in domestic prices and international prices. Nominal protection coefficient was used to know the competitiveness of the Indian ginger. Markov chain analysis was used to evaluate the dynamic nature of trade pattern by examining the gains and losses in export share of major importing countries. Compound growth rate analysis was used to calculate the growth rates of area, production, export quality and export values. Simple correlation was used to examine the price relationship between two markets and existence of market integration.

Findings of the study The important findings of the study are summarized and suitable conclusions were drawn and presented below: Trends in domestic and international prices Trends in domestic prices of ginger was fluctuating in the late periods of WTO. The domestic prices depended on the supply of ginger, number of traders and buyers, gulf crises in the early and mid nineties. Devaluation of rupee was also a main reason for the cheaper export price. In the late periods of WTO the prices again started decreasing due to supply outstriping the demand globally. The international prices of Cochin ginger were found to be decreased in late 90s and now it was fluctuating due to competition from the countries like China, Nigeria and Thailand. In the late period, the situation of fluctuating prices was due to imbalance between supply and demand for ginger. An average NPC value over 20 years for the domestic market price was 0.70 indicated moderate competitiveness in the international market. Pakistan and Saudi Arabia were found to be highly loyal markets for Indian ginger indicated by the retention of their previous shares of exports from India, at the same time, these also gained some share from UAE. The growth rate between pre and post-WTO period in terms of area and production were positive. The export growth between pre and post WTO period in terms of quantity and values were found to be declining and negative. The correlation analysis revealed that the selected markets in three states were well integrated and the pair of Bangalore-Trivendrum market was highly integrated.

Policy implication To build up the confidence of growers of ginger (specially, small and marginal farmers) there is urgent need for crop insurance to cover all possible risks in the area of production, processing, storage and transport which may encourage them in cultivation of ginger and inturn helps in promoting the exports. In the era of economic liberalization and globalization small farmers find it difficult to participate actively in free market economy because of lack of economies of scale. Therefore,

they are shifting their cultivation for some other crops, to arrest this shift in cultivation there is urgent need to establish market linkages like contract farming, which would enable small farmers to reap the maximum benefits. The crop insurance is urgently needed. Unprecedented natural calamities often push the small and marginal growers into a crisis. To prevent this and build up their confidence in sticking to cultivation of ginger, it is necessary to extend crop insurance with suitable packages to cover all possible risks in the area of production, processing, storage and transport. The empowerment of rural communities, especially of women, in areas of production, on farm quality management and marketing should be on the boards priority list.

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EXPORT PERFORMANCE AND COMPETITIVENESS OF GINGER FROM INDIA

THANUJA.W.J

2006

Dr.H.S.S.KHAN MAJOR ADVISOR

ABSTRACT

India is rightly called as spice bowl of the world for its production of variety and superior quality of spices. In the area of export ginger occupies fifth position in terms of quality and sixth position in export earnings among the spices. The main competitors to India are China, Indonesia and Thailand. The main importers are Pakistan, Saudi Arbia, USA and Netherlands. A study conducted to analyze export performance and competitiveness of ginger from India with the objectives like trends in domestic and International prices of ginger, direction of trade of ginger export and impact of withdrawal of freight subsidies on export. Karnataka, Kerala, and Tamil Nadu markets were selected to study the market integration and export of ginger from Cochin port. The required data collected for the period of 20 years. The objectives are analyzed with trend, nominal protection coefficient, and markov chain and growth rate analysis. The international prices of Cochin ginger were found to be decreased in I and III phase and increasing in II Phase. An average NPC value over 20 years for the domestic market price was 0.70 indicated moderate competitiveness in the international market. Pakistan and Saudi Arabia were found to be highly loyal markets for Indian ginger indicated by the retention of their previous shares of exports from India. The growth rate between pre and post-WTO period in terms of area and production were positive. The export growth between pre and post WTO period in terms of quantity and values were found to be declining and negative. The correlation analysis revealed that the selected markets in three states were well integrated and the pair of BangaloreTrivendrum market was highly integrated.