Trade Dynamics of Lac Export from India

Abstract

Globally, India is one of the leading producers and exporters of Natural Resins and Gums (NRGs), notably lac, guar and karaya gums. Lac cultivation has long been associated with providing a sustainable source of income for rural people who rely on forest resources for their livelihood and acting as a buffer against crop failure. The lac growing belt in India overlapping with the nation’s major tribal belts creates better prospects for the tribal economic sustenance by reducing drudgery and generating valuable cash flow by promoting export. This paper explores the export potential of lac with an emphasis on export competitiveness and trade direction for the past two decades (2002-03 to 2021-22). The present study employed the Revealed Comparative Advantage and first-order Markov Chain approach. RSCA index value points out that India possesses a high comparative advantage in lac export relative to agricultural export in the global market. The major export destinations for Indian lac are the USA, Bangladesh, China, Germany, Afghanistan and Iraq. The Markov chain analysis findings revealed that the lac export's stability has improved over the study period. Export of Indian lac is likely concentrated in importing countries like the USA, Bangladesh and Germany. Throughout the study period, China and Iraq remained the most unstable importers of Indian lac, as indicated by the zero probability retention coefficients. A careful review of the trade pattern suggests that Bangladesh will continue to be a major importer in the coming years. Even though the USA remains the leading export destination, its total export share is declining as it is losing half its share to other countries. Although exports from this sector do not contribute significantly to the country's foreign exchange earnings, their importance lies in that roughly 3-4 million tribal people derive subsidiary income from its cultivation. Concerned efforts focusing on increased research and development, improving production, adding value in accordance with global demand, market diversification, and enhancing quality standards will help boost exports of Indian lac in the long run.