An Empirical Study on Forecasting Production and Price of Tea in India

Abstract

Tea is a very indispensable beverage for Indian population as we rank the world’s largest consumer of black tea. Indian tea industry had been facing many downfalls for the past few years in terms of low price, excess supply, losing flavour and all this as a whole had affected the performance of the tea industry in India. With India being the second largest producer of tea globally, the production of tea in India can be subdivided into North India and South India. The current study focuses on the comparative analysis between North India, South India and India in terms of their trends in area, production, yield, export quantity, export price, auction price and auction quantity of tea. Compounded Annual growth rate (CAGR) was the tool used to find the trends of various variables. This study also focuses on the forecasting the production and auction prices of tea in India till 2023using Autoregressive Integrated Moving Average (ARIMA) model. The results of the present study areindicating that all the variables like area, production, yield, export quantity, export price, auction price and auction quantity of tea had shown a positive trend annually, except for that of North India’s export quantity. Production and auction prices were forecasted till 2023 using different ARIMA models amongst which ARIMA (1,1,0) proved to be the best fit model for study period.