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1.2 History of Indian Spices
1.3 Indian Spices
1.4 Spices Trade
1.5 Producing Countries of Selected Spices
1.6 Region-wise Export of Indian Spices
1.8 Profile of the Processed Spices
1.9 Need for the Study
1.10 Problem Formulation
1.11 Questions rose
1.12 Objectives of the Study
1.14.2 Data Collection
1.14.3 Data Analysis
1.15 Review of Literature
1.16 Profile of the Study Area and Processed Spices Products Firms
2.2 Empirical Studies
2.4 Pure Spice Powders
2.4.1 Point of Divergence
2.4.2 Diversification Pattern and Time-lag in Pure Spice Powders
2.5 Masala Powders
2.5.1 Diversification Pattern and Time-lag in Masala Powders
2.6 Cooking Pastes
2.6.1 Diversification Pattern and Time-lag in Cooking Pastes
2.7 Instant Mixes
2.7.1 Diversification Pattern and Time-lag in Instant Mixes
Growth Performance of Processed Spices Products Industry
3.2 The Need for Growth
3.3 Empirical Studies
3.5 Growth Indicators
3.6 Number of Enterprises
3.7 Gross Block
3.10 Comparative Analysis of Inter-Product Group Growth Rates
Total Factor Productivity Trends of Processed Spices Products Industry
4.2 Significance of Productivity Measurement
4.3 Total Factor Productivity
4.4 Measurement of Total Factor Productivity
4.5 Solow Index
4.6 Total Factor Productivity in Processed Spices Products Industry
4.7 Inter-Product Group Comparative Analysis
Summary and Conclusion
5.2 Diversification Patterns
5.3 Growth Performance of Processed Spices Products Industry
5.4 Total Factor Productivity Trends of Processed Spices Products Industry
5.6 Suggestions and Recommendations
5.7 Area for further Research
1.1 Region-wise Export of Indian Spices
1.2 Product Groups in Processed Spices Products Industry
2.1 Diversification Pattern and Time-lag in Pure Spice Powders
2.2 Diversification Pattern and Time-lag in Masala Powders
2.3 Diversification Pattern and Time-lag in Cooking Pastes
2.4 Diversification Pattern and Time-lag in Instant Mixes
3.1 Inter-Product Group Analysis on the Number of Enterprises during 1990-2012
3.2 Inter-Product Group Analysis on the Gross Block during 1990- 2012
3.3 Inter-Product Group Analysis on the Employment during 1990- 2012
3.4 Inter-Product Group Analysis on the Output during 1990-2012
3.5 Comparative Analysis of Inter-Product Group Growth Rates during 1990-2012
4.1 Total Factor Productivity of Processed Spices Products Industry in Tiruchirappalli District during 1990-2012
4.2 Inter-Products Groups Comparative Analysis
2.1 Diversification Pattern under Pure Spice Powders
2.2 Diversification Pattern under Masala Powders
2.3 Diversification Pattern under Cooking Pastes
2.4 Diversification Pattern under Instant Mixes
2.1 Network of Diversification Pattern under Pure Spice Powders
2.2 Network of Diversification Pattern under Masala Powders
2.3 Network of Diversification Pattern under Cooking Pastes
2.4 Network of Diversification Pattern under Instant Mixes
4.1 Total Factor Productivity Index for Overall Processed Spices Products Industry
Spices are high value and low volume commodities of commerce in the world market. All over the world, the fast growing food industry depends largely on spices as taste and flavour makers. Health conscious consumers in developed countries prefer natural colours and flavours of plant origin to cheap synthetic ones. Thus, spices are the basic building blocks of flavour in food preparations. The estimated growth rate for spices demand in the world is around 3.19 percent, which is just above the population growth rate. India is known as “The Home of Spices”. No Indian meal is considered complete without the tangy and delectable flavour of Indian spices, locally known as ‘Masala’ . Indian spices famous the world over for their gastronic value is known to possess high medicinal values.
“The appeal of exotic spices used to be so great that they were once believed to be a gift worth of royalty.” Many ancient cuisines, among them Indian and Indonesian foods, have grown up next to the indigenous spices that identify them. Others, like the Italian and Spanish ones, have benefited from the spice trade’s migratory nature, adopting exotic spices and indelibly linking them with their own food. As research both old and new has helped us to better understand spices’ curative effects - psychological, as well as physical, the importance of spices in our lives becomes even greater.
From time immemorial, India has been considered as the “Spice Bowl of the World”. The history of Indian spices spans across more than 7000 years. It started centuries ago when Greece and Rome discovered that sailing ships were carrying Indian spices, perfumes and textiles to Mesopotamia, Arabia and Egypt. Then, the Greek merchants entered the markets of South India for buying numerous expensive items including the spices. The Epicurean Rome was lured by Indian spices, silks, brocades, Dhaka Muslin and cloth of gold, hence was spending a fortune. Due to this fact, even the Parthian wars were being fought by Rome to keep open the trade route to India.
After the arrival of the Muslims, Indian spices took a special place in Muslim dishes also and became famous throughout the country. Further, during the colonial rule, Arabian traders got the rare and exotic spices of the Far East from local spice merchants. India had spent the previous two millennia spreading its culture to the Spice Islands of the east and made good money by supplying these spices at high prices to the Indian middle men and Europe as well. In 1492 A.D, even Vasco Da Gama and Columbus were also searching for a new route to the spice lands of Asia.
During the British reign, spice trading was encouraged again, which resulted in the export of turmeric, saffron, coriander and a host of other Indian spices in various parts of the world. After independence, to keep the trade of Indian spices flourishing, the Board of Spices was established.
Out of the 109 spices listed by ISO (International Organization for Standardization), 63 are grown in India. 52 are under the Spices Board, Ministry of Commerce, India. There is no other country in the world that produces as many kinds of spices as India. In almost all of the 29 States and seven Union Territories of India, at least one spice is grown in abundance.
The serving as culinary ingredients, Indian spices have medicinal properties too and are, hence, good for health. In addition to this spices are well-known as appetizers and digestives and are considered essential in the culinary art all over the world. Some of them have anti-oxidant properties while others have preservative properties and are used in some foods like pickles and chutneys, etc. Some spices also possess strong antimicrobial and antibiotic activities.
Different parts of the spice plants are used to add flavour to the dishes. For instance, both the seeds and the leaves of the coriander plants are used as spices. Hence Indian spices are used in the forms of dried seeds, leaves, flowers, barks, roots, fruits and certain spices are grinded and used in the powder forms. At times a handful of spices are grind together and a paste is made to spice up Indian cuisines. Besides these the Indian spices are also used in Ayurvedic medicines; as preservatives and perfumes. It does not matter in what forms these are used as the Indian spices are sure to cast a magical spell on whoever uses them.
World trade in spices has shown a consistently upward trend over the past 25 years. According to United Nations Conference on Trade and Development (UNCTAD), world spice trade amounted to US $ 300.6 million during 1970-75 and rose to US $ 2,449.191 million in 2002. The Indian spice export was 2.25 lakh tonnes valued at Rs.1,213 crore during 1996-97. But presently, the spices export has crossed the billion US $ mark during 2007-08 with 4.44 lakh tonnes valued at Rs.4,435 crore from 3.73 lakh tonnes valued at Rs.3,576 crore during 2006-07. The spices export has continued its growth and during 2010-11 recorded 5.25 lakh tonnes worth of Rs.6,840.71 crore, an all time high both in terms of volume and value of spices export from India. Apparently, the export has shown an increase of 23 percent in value and 4.5 percent in quantity compared to 2009-10.
Among the export of different spices, maximum share was from chilli (40 percent) followed by cumin (11 percent), turmeric (11 percent), coriander (6 percent) and black pepper (5 percent) during 2009-10. However, in terms of value, mint products and spice oil & oleoresins contributed 44 percent of the total export earnings. Chilli, cumin and black pepper contributed 20 percent, 10 percent and 8 percent, respectively to the total export earnings. During 2010-11, the export of ginger, tamarind and value added products like spice oils, oleoresins and curry powders increased both in volume and value. However, in case of pepper, large cardamom, turmeric, nutmeg and mace the export increase was in terms of value (upto 22 percent) only. On a global scale, the annual growth rate in spices consumption is estimated at around 10 percent. At this rate, the world trade by 2020 will be around 24.2 lakh tonnes. During the past few years, large cardamom, turmeric, seed spices and curry powder have registered substantial increase in export earnings.
Indian spices flavour foods in over 130 countries and their intrinsic values make them distinctly superior in terms of taste, colour and fragrance. The USA, Canada, Germany, Japan, Saudi Arabia, Kuwait, Bahrain and Israel are the main markets for Indian spices. North America (USA and Canada) and Western Europe are the most important regions having the import demand for many of the spices. Mexico continues to be the major importer of cinnamon and cassia while Saudi Arabia, Bahrain, Kuwait and Israel are the major markets for green cardamom, black pepper, ginger and turmeric. India has near monopoly in spice oils and oleoresins and Indian spices have obtained geographical indicators.
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Table-1.1 indicates the region-wise export data for various periods, it can be seen that the Asian zone is fast emerging as the major destination for Indian spices with 53.1 percent in quantity and 41.9 percent in value followed by American zone and European Union countries. World trade in spices has shown a consistently upward trend over the past 25 years. Value added products including spice oils and oleoresins, mint products, curry powder/paste/condiments, and spice powders contributed around 58 percent in value towards the total export earnings.
Table-1.1 Region-wise Export of Indian Spices
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Source: Spices Board, Cochin.
India occupies a dominant position in spices export. Spices sector is a very important source of income, employment and export earning commodity. Thus the production and export could be accelerated significantly through advanced technologies. Biotechnology & tissue culture, development of market infrastructure, storage and transport will pave way for increase in production and export. Value-addition in the spice sector has achieved commendable position in areas of exports.
As per the current Foreign Trade Policy, there is no quantitative restriction on import of spices into the country except for items like 'seed quality' spices, Fresh Ginger and Poppy seed. The tariffs for import have also been steadily brought down. Under Free Trade Agreement with Sri Lanka, duty free import of spices is permitted. Duty free imports are also allowed under the Advance Authorization Scheme for value addition and re-export.
Indian spices exports have been able to record strident gains in both volume and value in rupee terms. It is the first time in the history of spices export the growth in volume registered an all time growth of 22 percent. Spices exports have registered substantial growth during the last five years, registering an annual average growth rate of 21 percent in value and 10 percent in volume and India commands a formidable position in the World Spice Trade. During the 2012-13, a total of 726,613 tonnes of spices and spice products valued Rs.12,112.75 crore has been exported from the country as against 5,75,270 tonnes valued Rs.9,783.42 crore in 2011-12, registering an increase of 22 percent in volume and 14 percent in rupee terms of value. Compared to the target of fixed 5,66,000 tonnes valued Rs.8,203.50 crore for the financial year 2012-13, the achievement is 124 percent in terms of quantity and 136 percent in rupee and 134 percent dollar terms of value. During this period, the achievement in export earning is high and it is mainly due to the rigorous focus and initiatives taken by the board for value addition and higher end processing of spices.
Initially, raw spices were used for food making, subsequently, handmade spices powders were used for cooking. As day passed on, people like tastier and flavoured food, the cause of which comes to true the utilization of the spices and masala powders (processed spices products). To fulfill the requirement and satisfaction of people, various firms have started manufacturing of spices powder. Masala powders, ready mix powders under their branded names and marketing across the country. Apart from the fulfillment of the consumer requirement the processed spices products industry has started to produce and supply the product in the market.
In the world of real business, it is fairly known that the successful growth of most firms depends upon their ability to expand and realign their products in responses to challenges and opportunities presented by economic, political and social changes. In recent years, the changes in technology and consumption pattern have made a large number of products obsolete. Consumer’s acceptance of new products and new styles of living have become an accepted fact. Growing urbanization, the increasing number of working couples, the spread of consumption culture through T.V, the difficulty in getting reliable domestic help in the urban areas, the increasing affluence of the high and middle income group of the population, the trend towards “quick food” life styles and the high price of domestic cooking fuels etc., have resulted in a remarkable progress of the processed spices products industry with diversified products in recent times.
There has been diversification of Indian diets away from food grains to high value products like milk, meat products, vegetables and fruits. Food processing industry has been registering good growth since the past few decades and particularly after nineties. The conditions are now ideal for the growth of this industry (Mahendra Dev & Chandrasekhara Rao, 2004). The Indian food processing industry was poised for explosive growth. Changing demographics, growing population, rapid urbanization and increased the demand for value-added products improved the prospects of the food processing industry in India (Selvakumar & Vimal Priyan, 2010). Ganesan et.al (2012) indicated that the India has abundant resources in terms of raw-materials for food production, including fruits, vegetables, spices, dairy products and edible oils. With urbanization and rising of disposable income, the lifestyle of consumers and their eating habits have evolved, thereby increasing the demand for processed and ready-to-eat food. Balamurugan (2012) found that the processing of agricultural commodities has increased the economic welfare of the farmers, processors and consumers.
Use of whole spices was decreasing in even homes due to being cumbersome and to save time and afford people now-a-days preferred processed spices. In hotels, restaurants, military establishments, food industry etc, only processed spices were used. There were a sharp rise in demand for processed spices for home consumption and export; hence ground and processed spices products industry had got a good scope (Strategic Business Plan Board of Consultants & Engineers, 1984). Sindhujain (1997) reported that 45 percent of kitchen time in urban homes in India is taken away in grinding and pounding garlic, ginger or onion into globules of paste. Padmanabhan (2000) inferred that the food habit of the household and employment status of the housewife influenced the consumption of processed spices significantly.
On the other hand, the scenario of present post harvest processing of spices was not encouraging in India. It leaded to export rejection due to unscientific processing methods; large quantities of spices produced were also spoiled every year Jose (2004). Jun Takeda et.al (2008) all of the families in the surveyed area had not adopted any standard quantity of species; it depended on the previous cooking experience of the housewife.
Omesh Saigal (2001) In India, agriculture has largely been to subsistence and market driven. This has not yielded adequate surpluses for processing. This was the main reason for the slow growth in the food processing sector in India. The tax in India on processed food is amongst the highest in the world and this has been a major single impediment in attracting investment, both locally and from abroad. According to him the Indian consumers are highly price sensitive in nature, hence they do not come forward to consume high priced packaged foodstuff. This is also one of the important reasons for the low investment in the food processing sector in India. He also stated that in India there are multifarious food laws, in which many laws were framed some 50 years ago. In the current liberalized economic environment, they are considered as major hurdle for the development of food processing industry in India.
Thus, in this study an attempt is made to examine the growth, total factor productivity and diversification patterns in processed spices products manufacturing industry.
In this fast moving world, people have very less time to do a lot of work in their day-to-day life. In order to complete their works quickly, make use of ready-made processed spices products that save them a lot of time in doing a work, since it is less time consuming, saving energy, etc. Since the potential for market expansion of the processed spices products are vast, there are mushrooming of processed spices products firms in and around Tiruchirappalli, and the competition among them is very acute. Unless the firms reduce cost of production, it will be very difficult to survive in the market. Across four p’s viz: Product, Place, Price and Promotion available to tackle the competition, processed spices product firms preferred product and strategies to fight it out through product diversification (Product Innovation).
1. What is the concept of diversification?
2. What are the products that are preferred in processed spices products industry?
3. What is the pattern of diversification and what is the time-lag involved across each diversification?
4. What is the growth of processed spices products and what are the indicators of growth?
5. What is the trend of total factor productivity in processed spices products industry?
With the above questions in the background, the study focuses on the segment with reference to the following objectives:
1. To trace the diversification patterns in processed spices products.
2. To analyse the growth of processed spices products industry with reference to selected economic indicators.
3. To analyse the total factor productivity of processed spices products industry in Tiruchirappalli district.
The following hypotheses are formulated for testing:
H1: Processed spices products industry is expected to register better growth rate.
H2: Processed spices products industry’s Total Factor Productivity (TFP) growth is expected to be stable and better during the period of study.
The product diversifications are phenomenal, horizontally and vertically with multi-dimensional economic ramifications. Processed spices products firms dominate the Food Industry. The diversification rate is higher and faster. Time-lag across each diversification is low rendering and the diversification pattern is fascinating in the processed spices products industry. In the light of this development it seems pertinent to focus the study on growth, total factor productivity and diversification patterns towards the products of processed spices products industry.
In order to understand the research problem, the relevant informations have been collected from secondary sources. All the available data at the District Industry Centre (DIC), Trichy have been incorporated. The cross check has been made in order to check the validity of secondary data collection with 20 spices processing firms in the study region. By adopting the complete enumeration method (or) census method, the data have been collected from all these firms. The study covers the period from 1990 to 2012. The data for the selected product groups have been drawn from the records of the District Industry Centre (DIC), Trichy. There are 13 product groups as per Activity & Commodity Classification for MSME Sector (Based on A Standard Industrial Commodity Classification (ASICC) 2000 & National Industrial Classification (NIC) 2004) and data pertaining to all these firms for the period from 1990 to 2012 have been collected.
For the purpose of analysis, the collected data were classified into product group-wise over different years. In order to examine the various objectives of the study, the conventional statistical and econometric tools i.e., Compound Growth Rate, Solow’s Index and Regression analysis have been used.
The product groups considered in the analysis are:
Table-1.2 Product Groups in Processed Spices Products Industry
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Note: *- These products were under in ASICC Code 12299 (Spices, processed or not, n.e.c.) before 2009.
An attempt has been made to bring about relevant past studies in order to gain a good background for understanding the present study. It is organized in the following sequence. The first part reviews the studies on food and food processing industry. The second part is devoted to the studies on spices and processed spices products industry. The third, fourth and fifth parts reviews are the studies on diversification, growth and productivity respectively.
The following earlier studies are reviewed the various aspects of food and food processing industry. Subramanian and Mohanan Pillai (1986), Lakwinder Singh and Singhal (1987), Jairus Banaji (1997), Sukhpal Singh (1997), Carol and Michael (1999), Sarin (1999), Michalis (2000), Omesh Saigal (2001), Mahendra Dev and Chandrasekhara Rao (2004), Nandagopal and Chinnaiyan (2004), Gopalapillai (2005), Spyridon Mamalis (2009), Selvakumar and Vimal Priyan (2010), Gaikwad and Pawar (2011), Praduman Kumar et.al (2011), Ruchira Shukla et.al (2011), Balamurugan (2012) and Ganesan et.al (2012).
SBP Board of Consultants and Engineers (1984), Mamatha and Chengappa (1996), Chajankunju (1997), Sindhujain (1997), Padmanabhan (2000), John (2003), Jose (2004), Hema and Ranjit Kumar (2007), Jun Takeda et.al (2008), Mariammal and Darling Selvi (2010), Menon (2010), Saravana Dorai et.al (2010), Angles (2011), Srivastava et.al (2011) and Thumar (2012). Some of the researchers were devoted production and export of spices. A few studied consumer satisfaction, consumer behavior and brand preference.
Rumelt (1982), Cynthia and Montgomery (1985), Barbara (1990), Dhanmamjiri Sathe (1995), Balagopalan and Moorthy (1996), Chadha (1996), Mythili (1996), Michael et.al (1997), John Baldwin et.al (2000), Mariko Sakakibara (2001), Sharma et.al (2001), Gongming Qian (2002), Tatsuo Ushijima and Yoshitaka Fukui (2004), Gavin (2009), Peter and Marc (2010), Rene Sollner (2010), and Jean-Paul and Salvatore (2012). It is observed that the various studies listed above derived contradictory results. In some studies found to be positive impact, in others it is not so.
Anbumani (1985), Vijaya Kumar and Venkatachalam (1997), Burange (1999), Chinnappa and Keshava Reddy (1999), Tirthankar Ray (1999), Jeemol Unni et.al (2001), Shanmugam et.al (2002), Balakrishnan and Suresh Babu (2003), Ganesan (2003), Hannu Littunen and Tohmo (2003), Narayanan (2003), Veeramani (2004), Nagaraj (2005), Stan Metcalfe et.al (2006), Paramjeet Kaur (2007), Chakravarty and Mitra (2009) and Vanitha and Manimalathi (2010). The studies reviewed on the growth aspect in small, medium and large scale industries in regional and national levels. The literature does point out that number of units, capital, installed capacity, labour, value added, sales, output and profits are considered as important growth indicators and most of the researchers have computed growth rates based on the compound interest rate formula.
Deepak Gupta (1985), Ahluwalia (1991), Subramanian (1992), Chiranjib Neogi and Buddhadeb (1994), Martin et.al (1996), Subal Kumbhakar and Heshmati (1996), Leung (1997), Arup Mitra (1999), Ramaswamy (1999), Saurabh Bandyopadhyay (2000), Steven et.al (2000), Tarlok Singh (2000), Agarwal (2001), Bee-Yan Aw (2002), Mahadevan (2002), Bishwanath Goldar and Anita Kumari (2003), Ruhul Amin Salim (2003), Pushpa Trivedi (2004), Brouwer et.al (2010), Aradhna Aggarwal & Takahiro Sato (2011) and Manonmani (2012). Productivity growth is investigated at different levels: firms and industry, national and regional-wise analysis with different model specifications. The results derived from these reviews indicate that the productivity growth has however been mixed. In some studies found to be positive, in others it is not so.
Thus it is evident that most of the studies reviewed above had focused on the issues such as diversification, growth and productivity trends etc., in traditional and modern industries. But the studies on processed spices products industry are very few and scanty. No worthwhile studies have been made so far to analyze the growth, total factor productivity and diversification patterns in processed spices products industry. In order to fill these gaps this study has been undertaken on processed spices products industry.