Competitiveness, trade direction, and exporter constraints: A statistical analysis of Indian dry chilli exports

Introduction

India occupies a position of global dominance in the spice sector, acting as the world's largest producer, consumer and exporter. The country accounts for approximately 70-75 per cent of global spice production, spanning an agricultural area of 4.5-5.0 million hectares with an annual output of 10-11 million tonnes. Supported by diverse agro-climatic zones, India cultivates a wide matrix of spices, including turmeric, ginger, cumin, coriander and pepper. While 85-90 per cent of this massive yield satisfies domestic culinary, pharmaceutical and cosmetic industries, the remaining surplus is exported to over 180 countries, cementing the sector's role as a high-value pillar of Indian agriculture (Spices Board, 2024). Among these commodities, the common hot chili (Capsicum annuum L.) stands out as the most strategically significant crop, leading all other spices in both cultivation area and production volume. Cultivated across more than 120 countries, chili is highly valued in the global processed food, pharmaceutical and oleoresin industries due to its distinctive biochemical properties: capsaicin, which drives its intense pungency and capsanthin, a powerful antioxidant responsible for its vibrant red colour. Globally, dry chilis dominate international trade, with India leading global output ahead of other major producers like China and Mexico (FAO, 2024; Pandit et al., 2020; Singh and Kumar, 2025; Spices Board, 2024) [7,9] . On the domestic front, India accounts for 35-40 per cent of global chili production, dedicating nearly 8-10 lakh hectares to the crop, which yields an annual green chili equivalent of 7.5-8.0 million tonnes. Production is highly concentrated in states like Andhra Pradesh, Telangana, Madhya Pradesh and Karnataka, with the Guntur region of Andhra Pradesh serving as the premier international hub for trading and processing. India's geographical diversity has fostered unique regional varieties tailored to specific commercial niches, ranging from the high-color, low-pungency Byadgi chili (favoured for paprika oleoresin extraction) to the well-balanced Guntur Sannam and the hyper-pungent Bhut Jolokia of Northeast India (Pandit et al., 2020) [7] . The economic vitality of the Indian chili sector is heavily reliant on a delicate balance between domestic consumption and international trade. Approximately 80-85 per cent of the national harvest is retained for household cooking and industrial processing within India, while the rest is exported as dry red chilis, powders and high-value oleoresins. In 2024, India's dry chili exports generated substantial global revenue, with major buyers including China (importing over 186,000 tons), followed by Bangladesh, Thailand, Sri Lanka and the USA. To optimize these returns, the industry has increasingly shifted toward value-added products like essential oils and blended spices, which fetch higher premium prices in volatile global markets (FAO, 2024; Geetha and Selvarani, 2017; Spices Board, 2024) [8] . Despite its strong market presence, the chili sector faces critical vulnerabilities that threaten long-term sustainability. [5,7,9] .

Objectives

 To analyse the export competitiveness of Indian dry chilli  To estimate the direction of trade of Indian dry chilli in the international market  To study the constraints faced by dry chilli exporters in India

Methodology

Primary data was collected by using structured questionnaire. The information related to constraints of dry chilli exports was collected from 10 exporting company. Secondary data regarding the area, production, price and exports of dry chilli over a period of time was collected from website https://apeda.gov.in/, spices board of India and FAOSTATE etc. Twenty years (2004-2005 to 2023-2024) dry chilli export data of India was used to find out the export competitiveness in dry chilli and the direction of trade and changing pattern in export of dry chilli.

Period of Study

The data regarding production, export quantity, value of export, domestic price and international price of dry chilli in India was collected for the years 2004-05 to 2023-24. The period was divided into three periods,  Period 1:

Statistical Analysis

According to requirement of the specific objectives of the study and based on nature and extent of availability of data, RCA index, markov-chain approach and garret's ranking technique was used.

Revealed Comparative Advantage

The revealed comparative advantage was used to assess the comparative advantages of Indian dry chilli export. It measures a country's relative advantage or disadvantage in exporting a specific product compared to the world. It helps in analyzing export competitiveness (Balassa, 1965) [2] .

Where, RCA ij = Revealed comparative advantage of the i th country's j th commodity X ij = value of country i th export of product j X it = country i th total export value X wj = World export value of product j X wt = world's total exports value If RCA > 1, then the country has a revealed comparative advantage in that commodity, RCA < 1, then the country has a revealed comparative disadvantage in that commodity and RCA = 1 shows comparative neutrality.

Markov-Chain Approach

The trade direction of dry chilli was analysed by using the first order Markov chain approach. Central to Markov chain analysis is the estimation of transitional probability matrix P. The elements P ij of the matrix P indicate the probability that export was switched from country i to country j with the passage of time. The diagonal elements of the matrix measure the probability that the export share of a country was retained. Hence, an examination of the diagonal elements indicates the loyalty of an importing country to a particular country's export (Markov, 1906) [6] .

In the context of the current application, major importing countries of dry chillis was considered. The average exports to a particular country were a random variable which depends only on the past export to that country, which can be denoted algebraically as,

Where, E jt = Export from India to j th country during the year t E it-1 = Export to i th country during the period t-1 P ij = Probability that the exports were shifted from i th country to j th country e jt = The error term which is statistically independent of E it-1 t = Number of years considered for the analysis n = Number of importing countries The transitional probabilities P ij , which can be arranged in a (C × R) matrix have the following properties: 0 ≤ P ij ≤ 1 ∑ 𝑃 𝑛 𝑖=1 ij = 1 for all i Thus, the expected export shares of each country during the period 't' were obtained by multiplying the export to these countries in the previous period (t-1) with the transitional probability matrix.

Garrett's Ranking Technique

The Garret's ranking technique was used to study the constraints faced by exporters (Garrett, 1969) [4] . The Garret's ranking technique was calculated through the following formula:

Per cent position = 100 (Rij -0.5)

Nj

Where, R ij = Rank given to the i th constraint by the j th individual N j = Number of constraints ranked by the j th individual By referring to the Garret's table, the per cent positions estimated was converted into scores.

𝑀𝑒𝑎𝑛 𝑠𝑐𝑜𝑟𝑒 =

𝑇𝑜𝑡𝑎𝑙 𝐺𝑎𝑟𝑟𝑒𝑡𝑡 𝑆𝑐𝑜𝑟𝑒 𝑁𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑅𝑒𝑠𝑝𝑜𝑛𝑑𝑒𝑛𝑡𝑠 Thus, for each factor, the scores of the various respondents were added and then the mean value was estimated. The attribute with the highest mean value was considered as the most important constraint and the others was followed in descending order.

Results and Discussion

Export Competitiveness

The Direction of Trade

The data presented in Table 3 details the Transition Probability Matrix (TPM) for India's dry chilli export trade from 2004-05 to 2013-14, illustrating the statistical likelihood of major export destinations either retaining their market share or losing it to competing countries. The bolded diagonal values represent market retention rates, revealing that Thailand is the most stable destination, retaining approximately 66.38 per cent (0.6638) of its trade share, followed closely by the aggregate "Others" category at 58.91 per cent (0.5891). In stark contrast, Sri Lanka exhibits absolute market instability with zero retention (0.0000), losing its share predominantly to "Others" (0.6367) and Malaysia (0.3526). Furthermore, the off-diagonal figures highlight significant market volatility and shifting trade alignments across the decade; for instance, China shows a high probability of losing its share to Thailand (0.4796), while the USA demonstrates a strong tendency to shift its export share to Malaysia (0.4932) and Sri Lanka (0.2154), underscoring a highly dynamic and fluid international trade landscape for Indian dry chillies during this period. From/To China Sri Lanka Thailand Malaysia USA Others China 0.3085 0.0000 0.4796 0.0000 0.0000 0.2119 Sri Lanka 0.0107 0.0000 0.0000 0.3526 0.0000 0.6367 Thailand 0.0000 0.0000 0.6638 0.0000 0.0000 0.3362 Malaysia 0.0002 0.0126 0.0000 0.3376 0.3565 0.2931 USA 0.0000 0.2154 0.0000 0.4932 0.2914 0.0000 Others 0.0188 0.2945 0.0657 0.0000 0.0320 0.5891

The data presented in Table 4 outlines the Transition Probability Matrix (TPM) for India's dry chilli export trade over the decade spanning 2014-15 to 2023-24, detailing the likelihood of major international markets either retaining their import shares or losing them to competitors. The bolded diagonal values signify market retention, overwhelmingly highlighting China as the most stable and dominant destination, successfully retaining a massive 88.67 per cent (0.8867) of its trade share. In stark contrast to China's stability, traditional markets such as Sri Lanka (0.0287), the USA (0.1440), Thailand (0.1558) and Malaysia (0.1616) exhibit exceptionally low retention rates, indicating high market volatility. The off-diagonal figures reveal that a significant portion of the trade share from these volatile countries is shifting heavily toward the aggregated "Others" category-which captures shifts of 0.6158 from Sri Lanka and 0.5589 from Thailand-illustrating a recent global landscape defined by a single, highly concentrated anchor market in China surrounded by broad realignments and fragmentation across the rest of the world. The data provided in Table 5 presents the Transition Probability Matrix (TPM) for India's dry chilli export trade over the entire twenty-year period from 2004-05 to 2023-24, detailing the statistical likelihood of major markets retaining their import shares versus losing them to other nations. The bolded diagonal figures, which represent market retention, reveal that China is overwhelmingly the most stable and dominant destination, successfully retaining 93.86 per cent (0.9386) of its trade share over the two decades. Thailand (0.6193) and the aggregated "Others" category (0.6105) also demonstrate strong historical retention. Conversely, traditional markets like Sri Lanka (0.0824) and the USA (0.3000) exhibit extreme volatility; the off-diagonal figures show that Sri Lanka heavily lost its share to the "Others" category (0.6176), while the USA frequently saw its trade share shift toward Malaysia (0.3850) and Sri Lanka (0.2180). Ultimately, this comprehensive matrix underscores a long-term global landscape defined by China's ironclad market capture, contrasted against significant fluidity and realignment among India's other historical export partners.

The Constraints Faced by Exporters

The data provided in Table 6, which ranks fourteen specific constraints faced by dry chilli exporters based on their total and mean severity scores. According to the data, economic volatility poses the most significant challenge, with "Uncertainty in price of dry chilli" taking the top position (Rank I) with a leading mean score of 79.7, closely followed by the "Fluctuation of currency rates" (Rank II, 72.5).

Operational and logistical hurdles also rank highly, as seen with "Competition among exporters" (Rank III) and the "High cost of transportation" (Rank IV). Conversely, constraints such as "Poor quality of dry chilli" (Rank XII) and a long "Money transfer process" (Rank XIII) received the lowest scores, indicating that while exporters struggle heavily with unpredictable market pricing and currency valuations, they are significantly less burdened by product quality or financial transfer delays.

Conclusion

In conclusion, the two-decade statistical analysis of Indian dry chilli exports highlights the country's unshakeable and highly specialized comparative advantage in the global market. The study reveals a profound structural pivot in international trade dynamics, characterized by a transition away from highly volatile traditional markets-such as Sri Lanka and the USA-toward China, which has rapidly emerged as India's most stable and dominant export destination. Despite this robust international demand, Indian exporters remain significantly constrained by economic vulnerabilities, with unpredictable commodity pricing and fluctuating currency exchange rates posing the greatest threats to profitability, followed closely by high transportation costs and intense market competition. Ultimately, while India's competitive dominance in the dry chilli sector is secure, ensuring the industry's long-term sustainability will require targeted policy interventions and strategic planning to mitigate these critical economic and operational risks.

References

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