Performance of Indian Coffee Sector: An Economic Analysis

Abstract

The study analyses the dynamics in area, production and productivity of coffee in India. It was analyzed using trend analysis, instability analysis and decomposition analysis. The time period chosen for the study was 1961 to 2020. The years were divided into three periods namely the pre-liberalization period (1961-1989), the post-liberalization period (1990-2020) based on the liberalization of the coffee market. The results showed that the area under coffee increased from 115000 ha (1961) to 459730 ha (2020). The production increased positively at 3.39 percent and the area at 2.60 percent at one percent level of significance in the post-liberalization period. The stability in area (46.71%), production (47.57%) and productivity (41.30%) increased from the pre-liberalization period to the post-liberalization period. The decomposition results showed that a change in average production was highly influenced by change in the mean area (67.57%) and change in variance of production was contributed by the change in area variance (281.74%) and change in the mean area (205.89%). Indian coffee trade performance was analyzed using Herfindahl-Hirschman Index. The results showed that India is less competitive in international coffee market. The study suggests increasing replantation programs for high yielding varieties and disease resistant varieties by replacing the age-old coffee plants in India which would not only increase production but also become competitive in the international market.