India's Tea Industry: A Long Forgotten Sector

As many may know, globalization is a rising trend among many nation-states. Nation-states are becoming more interconnected as information, technology, and ideas are spreading like wildfires. However, globalization has the ability to either break down or build up a nation’s economy. In the instance of India, it has been known as the main source, second to China, for providing goods and services to developed countries. India is known for exporting textile goods, jewelry, and medical products. As for services, it is best known as the main settlement for outsourcing because of cheap labor. These components are the huge contributors to India economic success and rising power within the international system. With all the profitable advantages that globalization has brought to India, not all sectors of the economy is benefiting from this trend such as the tea production industry (as seen in the image to the left).

The tea market was once the most profitable sector in India’s economy. The tea production industry can be traced back to the British’s colonial rule. Dating back as far as the 1830s, the commercial production of tea began and flourished when the East India Company decided to move tea production from China to India. Thus, over the past decades even after India’s partition from Britain, India became one the leading suppliers of tea alongside China. According to a Euromonitor International article, “India [was producing] 826 million kg of tea in 2002, representing approximately 30% of the world’s tea supply.” Unfortunately, today, India’s tea industry has fallen into difficult times. Most tea farmers (as seen in the image to the right) are barely making a living as the tea market becomes more competitive and tea becomes more abundant. The family-owned tea farms are the ones that are struggling to survive. These family-owned farms are either bought out by large tea companies or go out of business due to lack of earnings. On a larger scale, the entire industry in India is looking at a bleak future in tea production as competition goes beyond the border.

Foreign competition has been one of the main reasons for the downward sales in Indian tea. Some underdeveloped and developing countries, like India, are taking advantage of globalization and are targeting the tea industry. Some of these countries are Vietnam, Sri Lanka, and Kenya. Due to cheap labor in these countries, they are able to sell their tea at a lower price than India can. A case study conducted by American University in Washington D.C. confirms that teas in Sri Lanka are sold at the low price of 1.5 U.S. dollars a kilogram, whereas India’s teas are sold for 2 dollars. Though the price difference is only 50 cents, foreign tea importers would prefer to buy Sri Lankan tea because they would be saving 50 cents per kilogram. In the world of business, companies and buyers are looking for the lowest common denominator, and they will always want to make a profit from it. Therefore, India must find a way to keep their tea prices down , but still make a profit to support their laborers, in order to attract and sway the buyers from the competition.

The Indian government has not taken full initiative to resolve this crisis. However, within some of the Indian states, the state governments have taken the initiative to enact laws to promote the tea industry. One of the laws is the Himachal Pradesh Ceiling on Land Holdings Act, which restricts tea farmers from selling their land or changing their land use. Yet, the act has not been very effective because it leaves the farmers stagnant. Basically, they are not raking in enough revenue, and they are not allowed to cultivate any crops other than tea. If this matter is not resolved, many tea farms will go out of business and the farmers will face poverty.

It could be in the near future that the Indian tea leaf industry could be coming to a close as foreign competition and ineffective land regulations by state governments leave the industry high and dry. I believe the life and death of the industry lies in the hands of the Indian government and how they regard its importance to India’s economy. The Indian government may either decide to close down the tea industry because it is a drag on the economy or they may decide to keep the industry and find a way to subsidize the tea planters.