Direction of Trade in Indian Pepper Exports: A Markov Chain Approach

Under the World Trade Organization (WTO) regime, countries hitherto inactive without any domestic market in the spice trade have emerged as producers, posing a substantial threat to traditional exporters like India. Against this scenario, this study attempts to examine the direction of pepper trade that will determine the status of Indian pepper in the world market and also help in formulating alternative management strategies and polices to boost exports from India. This study is designed to address the performance of Indian pepper during the two time periods viz., pre-WTO (1981-82 to 1994-95) and post-WTO (1995-96 to 2003-04). This study concludes that the US and the USSR were stable export markets for Indian pepper during pre-WTO period reflected by the high retention probabilities, but Canada had a moderate probability of retention. On the contrary, Italy and Germany had a probability of zero retention indicating that they were unstable importers of pepper during pre-WTO period as well as post-WTO period. But, during post-WTO period, Canada and the US remained comparatively stable markets for Indian pepper. The disintegration of USSR and the consequent reduction in the purchasing power of these countries led to a very low probability of retention by the erstwhile USSR countries. Finally, this study suggests that there are a number of approaches to remove impediments from day-to-day export business apart from quality improvement and value addition.