Falling rupee a boon for Tea exporters, Assam stands to gain

Guwahati: Amid the doom and gloom of the Indian rupee's depreciation against the US dollar, India's traditional exports, like tea, to which Assam contributes the lion's share, may enjoy a competitive advantage as a result of the steep decrease in the rupee.

Exporters from the region indicated they expect to get a higher price for their foreign exports, particularly in dollar-denominated markets.

However, a weakening rupee is likely to exacerbate inflationary pressures because India is a net importer, with the trade deficit rising on a regular basis.

"We would only benefit in dollar-pegged export destinations because the Indian rupee has declined against the US dollar but has risen against the euro and yen year on year," said Anshuman Kanoria, Chairman of the Indian Tea Exporters Association.

For example, an Assam-based firm sells tea to countries where the US dollar is used as the exchange rate.

So, suppose an Assamese business exports 1 kg of tea for US $ 4.5. Because of geopolitical concerns, the rupee has fallen further to 40, and $1 now equals 80. So, before the rupee depreciates, Americans will only receive 1kg for $ 4.5.

However, with the weakening of the rupee, Americans would be able to purchase 2kg for $1.

From the standpoint of Americans, they will now receive an additional kilogramme for the same price, making purchasing from India more affordable, and they will prefer more Indian products.

In two respects, this case benefits Indian exporters: They may sell more products since the Indian cash they receive after converting is now more valuable than before.

As a result, whenever the rupee falls in value versus the dollar, exporters benefit.

"It would boost Indian tea exporters, and so tea exports from India are anticipated to expand," said Bidyananda Barkakoty, Adviser, North Eastern Tea Association (NETA).

Agriculture exports, according to an official, are also expected to do well if the rupee continues to fall.

According to brokerage research, farm exports will account for 11.4 percent of global exports in 2021.

India is one of the top five tea exporters in the world, accounting for around 10% of global exports.

The overall value of tea exports from India in 2021 is expected to be about US$ 687.9 million. Indian Assam, Darjeeling, and Nilgiri teas are among the best in the world.

The eastern section of India is the largest producer, accounting for around 83 percent of the country's annual tea output in 2021-22, with Assam producing the most, followed by West Bengal.

The southern section of India accounts for around 17% of overall output, with the biggest producing states being Tamil Nadu, Kerala, and Karnataka.

India's total tea exports in 2021-22 were 201 million kg. Total exports were 65 million kg and valued at US$ 215 million from January to April 2022, a 9% rise from the same time in 2021.

Over the years, India's export price per kilogramme has steadily increased. The unit price of tea in 2021-22 was $3.62 per kg. This was $3.52 the prior year.