INTRODUCTION:

One of the important factors that raise competitiveness is factor endowments (Heckscher-Ohlin model) and that factor abundance has to be harnessed in a productive way to improving economic growth for any economies. Generally, it is seen that developing economies are exporter of primary sector based out-put and importer of secondary sector based out-put but in today’s world of cut-throat competition, as a part of higher growth strategy and increasing competitiveness, those economies have to change their production strategies.

In the long run for productivity growth it requires innovation, which can be defined as "the introduction of new or significantly improved goods or services, or the use of new inputs, processes, organisational or marketing methods (OECD and Eurostat Oslo Manual, 2005). To increase competitiveness, farms need to change their productivity over the period time and productivity can be changed with innovations. To face external as well as internal competition, for any farm it is extremely important to developing a new business model with entirely new production technologies, introducing value chain, informative advertisement and branding.

Competitive Advantage introduces the concept of the value chain, a general framework for thinking strategically about the activities involved in any business and assessing their relative cost and role in differentiation (Michael E. Porter 1985). Therefore, the existing natural comparative advantage needs to be upgraded with new production strategies or value addition so as to lead the economic growth to a higher trajectory path. This increasing competitiveness with value addition concept has to be introduced in different primary sector based out-put production farms in a developing economy like India. Tea and natural rubber are two important plantation crops production area where India ranks second position in terms of tea production just after Chain and followed by Kenya, Sri Lanka and Vietnam. In terms of rubber production Thailand is at the top position followed by Indonesia, Malaysia, India, Vietnam and Chain. India being key producer of tea and rubber needs to reorient its production and marketing strategies in domestic as well as in international markets. Assam, a North-Eastern state of India produces highest quantity of tea and is followed by West-Bengal (famous Darjeeling tea), Tamil Nadu (Nilgiri) Kerala and finally Tripura ranks fifth position in tea production in India and second position in North East Region (NER) of India. Simultaneously, natural rubber production takes place in little number of states like Kerala ranking first position followed by Tripura and Tamil Nadu in India. However, Tripura being a small North-Eastern Sate of India is traditionally (from 1916) producer of tea and in recent past has been a producer of rubber. The favourable agro-climatic condition and lucrative fiscal and monetary incentives boosted the investment in rubber plantation. In Tripura total area of 84480 hectares is under rubber cultivation and the production stood at 65330 (Mt.) in 2017-18. Tripura has 56 numbers of tea gardens covering an area of 6712.43 hectares.

OBJECTIVE OF THE PAPER:

On the above backdrop this paper’s main objective is an attempt to analyse the competitive position of Tripura in terms of tea and rubber production in India as well as to identify the potential international markets.

This paper initially discusses the conceptual idea of competitiveness, value addition and overview of rubber and tea production in ranks of other countries, India and finally Tripura. Relevant review of literature have been surveyed and summarised, relevant methodologies have been discussed and thereafter finally data analysis results have been discussed and conclusion has been drawn.

REVIEW OF LITERATURE:

A number of empirical as well as theoretical studies have been undertaken to examine the competitiveness and potential international markets for tea and rubber from Tripura. Some of the important studies, surveyed for doing the present work, have been summarised below:

In the literature of international economics, the prominent theories are mainly based on comparative advantage– the Richardian Theory and factor endowment- the Heckscher and Ohlin (H-O) Theory. In contradiction to Adam Smith’s theory of absolute advantage, Ricardo (1817) stated that comparative cost difference is the reason for international trade. Later on, the H-O theory explained that factor intensity is the basis for the difference in factor price across the countries which lead to international trade. The H-O theory also contradicts the Leontief paradox, i.e. Leontief (1951), using the US data of 1947 for his study showed that the US exported labour intensive goods and imported capital intensive goods even though the US was then the most capital abundant nation in the world and Leontief expected that it would export capital intensive commodities and import labour intensive commodities. In a nut-shell, the comparative advantage of classical trade theories is determined by pre-trade relative prices and a country has comparative advantage in a particular commodity if relative price of domestic goods is below its relative price in the world market. However, on this backdrop, Balassa (1965) introduced a method to calculate comparative advantage of goods, called Revealed Comparative Advantage (RCA) index.

Bela Balassa (1965) in the paper Trade Liberalisation and Revealed Comparative Advantage discusses the possible effects of trade liberalisation in the frame work of Kennedy round. This paper pays attention to reallocation of resources and freeing trade barrier, since these are impacted by comparative advantage.

Robert T. Green & Arthur W. Allaway (1985) in their paper Identification of Export Opportunities: A Shift-share Approach stated that the search for new export markets is a high priority for firms in the 1980s.

B. Balassa (1986), in the paper “Comparative Advantage in Manufactured Goods: A Reappraisal”, provided a text for Hechscher-Olin theory by simultaneously introducing trade flows, factor intensities, and factor endowments in the framework of a multi-country and multi-product model.

Bela Balassa and Marcus Nolanda (1989) in the paper, “Revealed Comparative Advantage in Japan and United States” analysed the changing pattern of comparative advantage of Japan and United States.

Yanrui Wu (2003) in the paper “Export Potential and Its Determinants among the Chinese Regions” did a comparative study of export performance among the Chinese regions using extended Hecksher-Ohlin model.

Utku Utkulu and Dilek Seymen (2004) in the paper “Revealed Comparative Advantage and Competitiveness: Evidence for Turkey vis-à-vis the EU/15” analyses the competitiveness and the pattern of trade flows/trade specialisation from Turkey to the EU on sectoral levels.

Marjit Sugata, Saibal Kar and Dibyendu S. Maiti (2007) in the paper, “Regional Trade Openness Index and Income Disparity - A New Methodology and the Indian Experiment” proposes a Regional Trade Openness Index (RTOI) based on the comparison of production proportion of a state and the export/ import shares of India.

M.P Bezbaruah (2007) in the article “Indo-Myanmar Border Trade: The Stakes for North East India”, discussed how far the expectation of Indo-Myanmar Border Trade realizable through North East Region and issues need to be emphasized to exploit the potentials.

Asopa, V.N. (2007) in his study “Tea Industry of India-The Cap that Cheers has Tears” discussed regarding India’s loss of Global tea market.

‘North Eastern Region: Vision 2020’ a document (2008) that portraits economic, social and demographic profile of the region. The report analyses the prospects of catching up of the NER with the rest of the country through structural transformation, poverty alleviation, maximising self-governance, harnessing resources for the benefit of the people, Building capacity in people and institutions, strengthening infrastructure, creating a centre for trade and commerce, effective governance by establishing peace and harmony.

Bibek Ray Chaudhuri and Debottam Chakraborty (2010) in the paper Export potentiality at the State-Level: A Case Study of Karnataka finds out the regional export potential taking different products from product basket of Karnataka.

Hans-Peter Brunner (2010) in the edited book North East India- Local Economic Development and Global Markets analyses the potential of the North East Indian economy, discussing ways in which it can be reconnected to the mainstream economic activities of India.

A research team comprising of Dr. Biswajit Dhar, Dr. Prabir De Dr. Gurudas Das and Prof. E. Bijoy Singh, (2011) prepared a project report named “Expansion of North East India’s Trade and Investment with Bangladesh and Myanmar: An Assessment of the Opportunities and Constraints” which submits that NER has the potential to become India’s “powerhouse” in terms of trade and investment.

Bibek Ray Chaudhuri and Abhishikta Roy Chowdhury (2012) in the paper Manufacturing Sector in West Bengal: Advantages & Potential derived the competitiveness of many products from the supply side for the state of West Bengal.

Jaya Prakash Pradhan and Keshab Das (2012) in their work “Regional Origin of Manufacturing Exports: Inter-State Patterns in India” conducted empirical analysis of export of different states and inter-state disparity of export for the period 1991-2008 and its contribution in the nation and state level economic growth.

Chakraborty (2013) in the paper “India’s Competitiveness Position with China in Global Market”, an attempt has been made to investigate the reason for this with respect to the competitive position of both the countries in the World. The sources of the competitive edge for both the countries have been identified. First, while China has achieved this growth mainly by riding on external demand, India has achieved its own growth mostly by the strength of its domestic demand (Tendulkar, 2000).

A Draft Discussion Paper, Mid-Term Review of Strategy for Doubling Export in Three years (2011-12 to 2013-14) of Ministry of Commerce and Industry, Government of India (2013) states that recently rising inflation has increased cost of inputs and rupee depreciation has increased the cost of imports of inputs which has adversely affected domestic manufacturing and subsequently export.

Abena D. Oduro and Emmanuel Larbi Offei (2014) in the paper, Investigating Ghana’s Revealed Comparative Advantage in Agro-Processed Products calculated annual Balassa’s RCA indices using four-digit level Harmonised System (HS) classification data (COMTRADE data base).

Abdullah-Al-Mamun, Muhammad Khalilur Rahman, Mohamed Taufiq & Muzzammir (2015) in their paper A Shift-Share Analysis of Electrical and Electronic Products: An

Overview and Assessment of Export Growth of Malaysia, examines the global export market and its prospect for Malaysia’s electrical and electronic (E&E) products by using Shift Share approach.

Adikari, S.B. and Sharma, A. (2018) in their study “Marketing Pattern of Rubber Plantation in Tripura”, analysed the pattern of natural rubber marketing in Tripura.

METHODOLOGY:

Competitiveness:

To measure the competitiveness of Tea and Rubber, Revealed Comparative Advantage (Balassa’s RCA, 1965) Index for both the products has been calculated separately basing on the annual production data of that state. This index measures the relative production of a particular product in a particular state compared to the relative production of that product at the national level. At this stage is worthwhile to mention that in case of measuring a country’s international competitiveness country level export data are used but here since we are measuring domestic state level competitiveness, we have taken annual production data of that state since precise export data are not available for state.

The formula for the index is given as follows:

RCA (production) =

P_iT = Production of i-th commodity in State T

P_T = Total production (of all commodities) in State T

P_iI = Production of i-th commodity in Country I

P_I = Total production (of all commodities) in Country I

Export Potential Markets:

To identify the potential international markets, Shift Share analysis (David L. Huff and Lawrence A. Sheer 1967) has been applied using country-level export data (Export of India; since export data are not compiled state wise rather it is compiled country wise and therefore these figures are same for all regions of India). Shift-share analysis requires measurements on a variable of interest (an exported product) for exporting countries at the beginning and end of a specified period of analysis. The absolute growth of the item exported to jth country can be measured as:

∆V_j = V_j,t –V_{j,t −1} --------------------------------------------(1)

Where V_j,t is the export of an item (tea or rubber) to j^th country in the year t which is the terminal period.

V_{j,t −1} is the export for an item (tea or rubber) to j^th country in year t-1 which is the initial period.

Now, K represents the total value of growth variable for all competitive (RCA>1) items and K is defined as the ratio of total value of terminal time periods to the total value at the initial time period:

K= _{----------------------------------------------- (2)}

Where j = 1---------n. The expected value of the growth variable at the end of the terminal time period is the product of growth of all items (K) and the value at the initial time period:

E(V_j,t) = KV_j,t-1-----------------------------------------------(3)

The expected change of the value of a growth variable for a particular item in a given time period is the difference between the expected value and the actual value for the item at the end of the initial time period. If E (∆V_j,t ) is the expected change, then:

E(∆V_j ) = E(V_j,t) –V_{j,t −1}= V_j,t-1(K-1)---------------------(4)

The difference between the actual change and the expected change is the net shift. So, if Net Shift is denoted as Nj, then

N_j = ∆V_j − E (∆V_j ) -----------------------------------------(5)

Now the sum of positive net shifts or the sum of negative net shifts denoted by S represents the total absolute net shift.

_{-----------------------------
(6)}

The relative gain or loss in the value of a growth variable for a particular product to particular country j, in a given time period is defined as the percentage net shift P_j

P_j= (100%) ------------------------------------------- (7)

Net shift signifies the percentage of the total gain or total loss of market share accounted for by each product (tea or rubber) to j^th country. The markets (countries) where products show positive net shift are identified as potential export markets.

Data Analysis and Major Emperical Findings:

Secondary data (national and state level) for tea and rubber and gross value addition of primary and secondary sector products from 2004-05 to 2015-15, required for RCA, have been taken from CSO, MOSPI, Government of India. The data are in constant price with two different base years 2004-05 and 2011-12 for two different series of data set 2004 to 2010-11 and 2011-12 to 2015-16. Country wise export data from India, required for Shift-share approach, has been downloaded from UN COMTRADE data base, HS-2007, 4-digit level data. This data set, analysed using RCA and Shift-share approach, has been discussed below-

Competitiveness of Tea and Rubber in Tripura:

The following diagram represents the plot of RCA values of tea and rubber production in Tripura. The competitiveness of rubber production at the national level is very high ranging from 4.73 to 8.65 which is the outcome that reflects Tripura’s second position in rubber production after Kerala. It is seen that during 2011-12 to 2012-13 competitiveness of rubber came down to 5.20 and 4.92 (Table1) respectively which are almost of same level in the year 2004-05 (4.73) and in 2005-06. From 2012-13 onwards rubber competitiveness is consistently rising to 8.65 in 2015-16.

The following diagram represents the plot RCA values of tea and rubber in Tripura.

Fig.1 Competitiveness of Tea and Rubber in Tripura:

Source: Calculated from data base, CSO, MOSPI, GoI

Table1: RCA Values of Tea and Natural Rubber from Tripura

Products	2004-05	2005-06	2006-07	2007-08	2008-09	2009-10	2010-11	2011-12	2012-13	2013-14	2014-15	2015-16
RCA of Tea	1.02	0.99	0.93	1.13	1.09	1.04	1.04	4.96	3.94	2.90	2.24	2.34
RCA of Rubber	4.73	4.99	6.32	7.36	6.48	6.76	7.54	5.20	4.92	6.27	7.63	8.65

Source: Calculated from data base, CSO, MOSPI, GoI

Table2: Potential markets for natural rubber:

Potential International Markets in 2012			Potential International Markets in 2016
Country Code	Country Name	Pj	Partner Code	Country Name	Pj
364	Iran	41.27	364	Iran	78.81
156	China	28.99	484	Mexico	1.45
144	Sri Lanka	25.93	524	Nepal	0.52
376	Israel	2.60	682	Saudi Arabia	0.49
381	Italy	0.48	818	Egypt	0.46
360	Indonesia	0.42	784	UAE	0.43
48	Bahrain	0.11	50	Bangladesh	0.37
643	Qatar	0.10	634	Qatar	0.30
276	Germany	0.09	512	Oman	0.12
			404	Kenya	0.10
			702	Singapore	0.10
			757	Switzerland	0.08
			414	Kuwait	0.06
			834	Tanzania	0.01

Sources: Calculated Shift-share analysis using UNCOMTRADE data base

Table3: Potential markets for Tea:

Potential International Markets in 2012			Potential International Markets in 2016
Country Code	Country Name	Pj	Country Code	Country Name	Pj
372	Ireland	26.06	364	Iran	41.56
586	Pakistan	15.28	50	Bangladesh	9.90
398	Kazakhstan	12.15	842	USA	6.73
156	China	11.52	276	Germany	6.33
276	Germany	6.10	156	China	5.52
528	Netherlands	4.33	381	Italy	5.31
268	Georgia	4.19	458	Malaysia	2.09
818	Egypt	3.42	124	Canada	1.67
458	Malaysia	2.78	804	Democratic People's Republic of Korea	1.57
360	Indonesia	1.71	524	Nepal	1.43
392	Japan	1.67	288	Ghana	1.34
381	Italy	1.39	686	Senegal	1.03
246	Finland	1.13	616	Poland	1.02
56	Belgium	0.68	246	Finland	0.92
417	Kyrgyzstan	0.63	414	Kuwait	0.92
792	Turkey	0.55	566	Nigeria	0.91
		-	854	Burkina Faso	0.66
			56	Belgium	0.62
			724	Spain	0.55

Sources: Calculated Shift-share analysis using UNCOMTRADE data base

Similarly, for tea the potential markets during 2015-16 are Iran (41.56), Bangladesh (9.90), (USA), Germany 6.33), Italy (5.31) South Korea (1.57) Nepal (1.43) and many other countries as mentioned in the tabe3. Moreover, India lost many other erstwhile potential markets like Pakistan (15.28), Kazakhstan, Japan, Italy, and Belgium. Another interesting observation is that even though countries like China, Malaysia, and Indonesia are in top ten lists in tea production, used to import tea from India due to verities during 2012, but during 2016 potential market share is declining. China tops in tea production in the world. Basically, they produce green tea and Chain’s domestic demand for black tea is met through import from India but over the last few years that demand is also declining as it is seen in 2012 shift share value was 11.52 and in 2016 it came down to 5.52.

CONCLUSION:

The findings of data analysis help us to infer that Tripura has high competitiveness in rubber production at the national level and it shows an upward trend but the major concern is that India’s export net-shift with major trading partner has been decreasing over the period and therefore, it draws the attention of policy makers to increase competitiveness through value addition. Similarly, tea sector in Tripura is competitive but that competitiveness is creeping marginally over the period of time and therefore, tea sector deserves more serious attention from concerned authority. As far as international market for tea is concerned, India has been facing major competition from other tea producing countries like China, Kenya, Sri Lanka and so on. At this stage India needs to redefine its trade strategies through value addition. These two products should not only be considered as intermediary commodities but have to be brought under value chain promoting brand value and gaining consumers’ trust.

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Received on 20.05.2019 Modified on 14.06.2019

Res. J. Humanities and Social Sciences. 2019; 10(3):775-781.

DOI: 10.5958/2321-5828.2019.00127.X