Why are the pepper prices declining? An analysis of changing production and trade scenario in India

During the 1950s, India was the major player in the pepper market. Recently India has dropped to 4th position in production and exports. The price per kilogram of pepper in Cochin market reduced from ` 687 to ` 383 between 2014-15 and 2018-19. This manuscript attempts to study the reasons for the decline in India’s share in world pepper market and the recent fall in prices. The secondary data from the Food and Agriculture Organization, World Bank World Integrated Trade Solutions, Reserve Bank of India and Spices Board of India were used for analysis. Transitional probability matrix was deployed to analyse the change in the direction of trade, relative comparative advantage and competitive index was used to study India’s market power in the international market. There has been a change in the direction of trade since 1999-2000. The results revealed a four per cent decline in area under pepper during 2000-2018, and now Indian pepper market has become import oriented with a CAGR in imports of 13 per cent during 1981 to 2000 and four per cent during 2001 to 2016. A similar trend was observed in production and exports as it got reduced from 25 per cent and 20 per cent in 1960s to ten per cent and five per cent respectively, in 2016. Increased supply in the international market, decreased production, cheaper imports and illegal imports have pulled down the domestic prices sharply in recent years. From 1995, workers’ wages have increased by around 10 per cent, and with decreasing prices, the Indian pepper industry looks grim. Appropriate policies to safeguard Indian farmers’ interest, such as export promotions, increasing productivity, delivering reasonable prices and incentives for processors would instil confidence in the farming community and the industry as a whole.