Export Competitiveness of Indian Coffee: Analysing Trade Potential in the Global Market

Abstract

Coffee plays a vital role in the Indian economy, serving as a significant agricultural export and a major source of income for millions of farmers, particularly in the southern states. The coffee industry not only contributes to India's foreign exchange earnings but also supports rural development and employment in various regions of the country. This study investigates the export competitiveness of Indian coffee in the global market, focusing on production volumes, trade potential, and comparative advantage. The study is mainly based on the secondary data obtained from ITC trademap, Coffee Board of India, etc. India ranks among the top coffee producers globally, with Karnataka, Kerala, and Tamil Nadu as the leading coffee-producing states. Despite consistent production growth, India's export competitiveness, measured through Revealed Comparative Advantage (RCA) and Revealed Symmetric Comparative Advantage (RSCA) indices, remains below that of major coffee-exporting countries like Honduras, Ethiopia, and Colombia. The study employs the gravity model, analysing India's coffee exports to 178 trading partners from 2014 to 2023. The Poisson Pseudo Maximum Likelihood (PPML) method addresses zero trade observations, providing robust estimates. The results indicate that larger economies import more coffee from India, while greater geographical distance negatively impacts trade. Interestingly, the analysis reveals a disconnect between India’s current export focus and its untapped trade potential. India has exhausted its trade potential in key markets like Italy and Belgium, yet these remain major export destinations. Conversely, significant untapped potential exists in markets like the United Kingdom, France, and the Netherlands. This misalignment suggests an opportunity for India to redirect its export strategies towards underutilized markets. The study concludes that enhancing production efficiency, improving product quality, and aligning export strategies with markets offering the greatest growth potential are critical for strengthening India’s position in the global coffee trade.