Economic Asymmetry of Cashew

EXCEL International Journal of Multidisciplinary Management Studies

Vol.2 Issue 3, March 2012, ISSN 2249 8834

Online available at http://zenithresearch.org.in/

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EXPLORING ASYMMETRIES IN PRODUCTION, EXPORT AND

IMPORT IN POST-GLOBALIZATION ERA: A CASE OF INDIAN

CASHEW-NUT INDUSTRY

DR. SHRIKRISHNA S. MAHAJAN*; PARASHRAM J. PATIL**

*Head,

Department of Commerce & Management,

Shivaji University, Kolhapur - 416004. India.

**Research Student,

Department of Commerce & Management,

Shivaji University, Kolhapur - 416004. India.

ABSTRACT

The globalization has provided dual impact as one is with inculcating number of opportunities to

various countries but another is with throwing challenges before developing countries as well as

underdeveloped countries. The globalization has made an impact on the trade of different

agricultural commodities like cashew. The cashew trade has an important contribution in India’s

international trade. India is major player in the international cashew market. The present research

paper highlights the asymmetries in India’s foreign trade of cashew in respect of cashew

production, import & export in the context of globalization. The globalization has an impact on

the cashew-nut industry in India as well as some other countries. The asymmetries are increasing

in Indian Cashew-nut industry.

KEYWORDS: Asymmetries, Globalization, Foreign trade, Cashew-nut, India.

______________________________________________________________________________

1. INTRODUCTION

The globalization is making the integration of all international economies in terms of the goods,

services and commodities etc. In the era of globalization in a last couple of decades, international

trade has changed its entire outlook dramatically. The globalization has provided dual impact as

one is with inculcating number of opportunities to various countries but another is with throwing

challenges before developing countries as well as underdeveloped countries. The agriculture

produce like cashew may have little contribution to the total agriculture production but some

countries are in the world whose agrarian population is dependent on the cashew production.

Hence it is significant issue to discuss at international level that what has happened with them in

this particular globalization scenario. The cashew trade has an important contribution in India’s

international trade. It plays vital role in contributing foreign exchange to the government of

India. Cashew-nut is the important horticulture crop which is secured the third rank in the

international market of horticulture crops. The cashew is a poor men’s crop but rich men’s food.

It is a source of income and livelihood for poor farmers. Cashew-nut industry may play very

important role in the development of hilly region or rural area. India has historical importance in

this regard that it is the first country in the world that started the international trade of cashew.




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2. MATERIAL AND METHODS

The present study attempts to analyze the situation of international cashew industry and its trade.

It is an analytical study of international cashew-nut industry and its trade. The data have been

collected for the present study from secondary sources like web-sites, annual reports and

statements, books, journals, periodicals etc. It has been supplemented by the primary data

collected through personal interview, discussion and non-participative observation. While

studying the global scenario of international trade of cashew, the present researchers observe that

globalization has an impact on the same trade at large which motivated them to analyze the

problem under study. The data collected have been processed by using tools and techniques for

bringing out the information on all aspects of international trade with the help of tabulation and

chart etc. While analyzing the data, statistical techniques like percentage, cumulative growth

index, mean, median, mode, standard deviation, coefficient of variation and skewness have been

used.

2.1 OBJECTIVES OF THE STUDY

(1) To explore asymmetries in respect of international trade of cashew in the era of globalization.

(2) To identify the impact of globalization on production, import and export of cashew in India.

2.2 HYPOTHESES

There is no significant difference in the asymmetries of India’s international trade of cashew

between the pre- globalization period and the post- globalization period.

3. THE REVIEW OF LITERATURE

The different aspects of cashew-nut have been covered by several scholars through out the world

under interdisciplinary umbrella. Cashew-nut is widely discussed in various research

publications, which are related to the production, processing, and export of cashew-nut. But few

studies discuss about international trade and its related problems considering globalization

context. Papademtriou et. al.(1998) have published the work done by various scholars on

production practices of cashew in Asian countries like India, China, Indonesia, Myanmar,

Philippines, Sri Lanka, Thailand and Vietnam. It shows the picture of cashew production

practices adopted by people from various countries in Asian continent, what kind of problems

particular country have regarding cashew production and importance of cashew in their

respective country’s economy. Wadkar et. al. (2005) have taken the review of performance of

cashew export of India since 1980-81 to 1999-2000 with the help of the time series data and

analyzing the different factors which affecting the performance of cashew. It has revealed that

the positive growth is there in terms of production and export of cashew because it enhances the

domestic production and increased the cashew kernel demand in the international market. India

had the monopolistic position in the international cashew market but greater competition is

coming from the countries like Brazil, Vietnam, and Mozambique etc. Mcmillan et. al. (2002)

evaluated the condition of cashew sector in Mozambique after the liberalization has taken place.

Mozambique liberalized its cashew sector because pressure came from World Bank. But it is

found that this reform is less benefited to poor cashew farmers and more bankrupting factories in




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urban areas. They have also analyzed the benefits from reducing restrictions on raw cashew

exports, position in employment in urban areas. They clearly say that inadequate attention to

economic structure and political economy seems to account for these disappointing outcomes

otherwise picture would have been different. Economic reform is not much benefited to the

Mozambique cashew industry as it was expected. Jafee (1994)

evaluates the impact of

liberalization process on the Tanzania’s cashew nut industry and how it is facing the challenges

thrown. The reform process has been extremely confusing. The policies of liberalization were

poorly communicated by the central government, outcome of which was a poorer result in the

first phase of liberalization. Sandhu (1982) has analyzed India’s share in export of cashew

kernels in the world trade with the help of statistical technique. It has declined over a period of

time. It suggests the policy makers for adopting various measures to maintain and improve the

India’s existing market-share in the world trade. After the review of literature it is found that

some studies have been made in the area of production & processing of cashew-nut but there is

gap of study on the issues in international trade, its economic asymmetries related to cashew-nut

industry in globalization context, which attracts the present researchers to carry out the study.

4. INDIAN CASHEW-NUT INDUSTRY

India is the major player in the cashew production in the world. The Indian environmental

conditions are suited for this crop. Therefore cashew production has good prospects in India.

TABLE 1

GROWTH OF CASHEW-NUT PRODUCTION IN INDIA

Year

Area of

Cultivati

on

in

Hectors

Cumulati

ve

Growth

in Area of

Cultivatio

n (In %)

Producti

on in

M.T

Cumulati

ve

Growth of

Productio

n

(In %)

Average

Productivi

ty in kg.

p.h .

Cumulativ

e Growth

of Average

Productivi

ty (In %)

1993-94 565420 100 348350 100 694 100

1994-95 577200 102 321640 92 631 90

1995-96 634970 112 417830 119 720 103

1996-97 659000 116 430000 123 835 120

1997-98 700900 123 360000 103 740 106

1998-99 706000 124 460000 132 800 115

1999-00 686000 121 520000 149 900 129




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2000-01 700000 123 450000 129 710 102

2001-02 750000 132 470000 134 710 102

2002-03 770000 136 500000 143 760 109

2003-04 780000 137 535000 153 800 115

2004-05 820000 145 544000 156 810 116

2005-06 837000 148 573000 164 815 117

2006-07 854000 151 620000 177 820 118

2007-08 868000 153 665000 190 860 123

Compound

Growth

14.49% 14.57% 43.75%

Source: Government of India, Directorate of Cashew & Cocoa Development,

Kochi

Table 1 indicates that the growth of cashew-nut production in India is analyzed in terms of area

of cultivation, production, & average productivity in k.g per hector. It revels the steady growth

in area of cultivation of cashew-nut during the period from 1993-94 to 2007-08. During the same

period, production of cashew-nut was continuously increasing from 1993-94. But in the year

2000-01 there was fall in production and again it is continuously increasing. With the exception

of 1994-95, 1997-98 and 2000-01, the average productivity of cashew-nut is also increasing.

Overall growth of cashew-nut production in India is showing increasing trend. It intents the

potential for processing units as an agribusiness in this field.

India is one of the leading countries in cashew processing in the world. The great demand is for

cashew kernel in International market as well as domestic market. Processing involves the

shelling, drying, peeling, grading and packing of kernels. The industry is highly labour intensive

and processing methods are completely manual.




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TABLE 2

CASHEW PROCESSING UNITS IN INDIA: 2005-06

Capacity Utilization of Processing Units

State

Processi

ng Units

(Nos.)

Capacit

y

(000’

MT)

Utilization (000 MT) Percentage of capacity

utilization Indigeno

us

Impo

rt

Tota

l

Kerala 432 700 67 320 387 55

Karnataka 266 65 45 20 65 100

Goa 45 21 21 - 21 100

Maharasht

ra

2200 20 20 - 20

100

Tamil

Nadu

417 565 294 225 519

91

Andhra

Pradesh

175

95

92

-

92 100

Orissa 60 11 11 - 11 100

West

Bengal

30 8 8 - 8

100

Chhattisga

rh

3 - - - -

-

NE States 22 15 15 - 15 100

Total 3650 1500 573 565 1138 75.87

Source: Government of India, Directorate of Cashew & Cocoa Development, Kochi

Note: *1850 units are in the form of cottage industry.




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FIGURE 1

STATE-WISE CAPACITY UTILIZATION OF CASHEW PROCESSING UNITS IN

INDIA

India is the largest producer and processor of cashew kernel in the world. Table 2 shows

Maharashtra is at top position in the country in terms of number of cashew processing units. But

in terms of total processing capacity Maharashtra is lagging behind other states. The number of

units in Maharashtra has increased due to inclusion of most of cottage industry. Kerala, Tamil

Nadu, Orissa, Andhra Pradesh, & Goa are contributing major share of cashew industry in terms

of number of cashew processing units. With considering total capacity Kerala is the state which

has the largest processing capacity (see table 2).

5. INDIA’S FOREIGN TRADE OF CASHEW

The export of cashew-nut industry is divided into two parts such as (i) Cashew Nut Shell Liquid,

(ii) Cashew Kernels.

5.1 EXPORT OF CASHEW NUT SHELL LIQUID FROM INDIA

The raw cashew nut has a shell which has unique content of dark reddish brown viscous liquid

which is called a ‘Cashew-Nut Shell Liquid’ (CNSL). The CNSL is extracted from the hard shell

of cashew-nut. It is an important by-product of the cashew-nut industry which has great demand

0

100

200

300

400

500

600

0

500

1000

1500

2000

2500Processing Units (Nos.)

Actual Utilization of Processing capacity




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in the international market (Stonis, 2001). It has been multipurpose commodity especially in

manufacturing industries. India is the major exporter of CNSL to the rest of the world.

TABLE 3

EXPORT OF CASHEW-NUT SHELL LIQUID FROM INDIA

Year

Export

Quantity

(In M.T.)

Export

Value

(In

Rupees in

Lukas)

Export quantity

Cumulative

Growth (In %)

Export Value

Cumulative Growth

(In %)

1990-91 5658 556 100 100

1991-92 4542 402 80 72

1992-93 4258 381 85 78

1993-94 3625 290 74 23

1994-95 3807 244 77 31

1995-96 760 145 24 14

1996-97 1735 277 41 37

1997-98 4446 717 88 116

1998-99 1572 326 38 186

1999-00 764 184 24 161

2000-01 2246 3894 40 828

2001-02 1814 419 33 203

2002-03 7215 925 128 294

2003-04 6926 703 123 255

2004-05 7474 791 132 270

2005-06 6405 709 114 257

2006-07 5589 920 100 294




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2007-08 7813 1197 139 343

Compound Growth 56.07% 45.47%


Note: For computing cumulative growth index, year 1990-91 has been taken as

base year.

FIGURE 2

EXPORT OF CASHEW NUT SHELL OIL

Table 2 indicates that the export of cashew-nut shell liquid is showing tremendous fluctuations

during the period from 1990-91 to 2007-08 and the growth of the export of CNSL is showing the

increasing trend over a period.

5.2 EXPORT OF CASHEW KERNELS FROM INDIA

The cashew kernel is main product of cashew-nut industry which has unique taste and great

demand in international market. India is the major exporter of cashew kernel to whole world.

0

100

200

300

400

500

600

700

800

900

19

90

-91

19

91

-92

19

92

-93

19

93

-94

19

94

-95

19

95

-96

19

96

-97

19

97

-98

19

98

-99

19

99

-00

20

00

-01

20

01

-02

20

02

-03

20

03

-04

20

04

-05

20

05

-06

20

06

-07

20

07

-08

Pe

rce

nta

ge G

row

th

Years

Export quantity Cumulative Growth (In %)

Export Value Cumulative Growth (In %)




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TABLE 4

EXPORT OF CASHEW KERNEL FROM INDIA

Year

Export Quantity

(In M.T.)

Export

Value

(In Rupees

in Lukas)

Export quantity

Cumulative

Growth (In %)

Export Value

Cumulative

Growth (In %)

1990-91 49874 44224

1991-92 47738 66909 95.71 151.29

1992-93 53436 74549 107.14 168.57

1993-94 69884 104602 140.12 236.52

1994-95 77000 124602 154.38 281.75

1995-96 70334 124050 141.02 280.5

1996-97 68663 128550 137.67 290.67

1997-98 76593 139610 153.57 315.68

1998-99 75026 160990 150.43 364.03

1999-00 92461 245145 185.38 554.32

2000-01 89155 204975 178.76 463.49

2001-02 97550 177680 195.59 401.77

2002-03 104137 193302 208.8 437.09

2003-04 100828 180442 202.16 408.01

2004-05 126667 270924 253.97 612.61

2005-06 114143 251486 228.86 568.66

2006-07 118540 245515 237.67 555.16

2007-08 114340 228890 229.25 517.56

Compound Growth 90.08% 10.20%




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FIGURE 3

EXPORT OF CASHEW KERNEL

Table 3 shows that over a period of time there is tremendous growth in export of cashew kernel

from India to different countries.

5.3 IMPORT OF RAW CASHEW

The existing production of raw cashew is not sufficient to meet the demand of domestic

processing units. Therefore India is importing large amount of raw cashew-nut from other

countries. The imported raw material is available when it is not available in domestic market.

India is the largest importer of raw cashew-nut in the world.

0

100

200

300

400

500

600

700

19

90

-91

19

91

-92

19

92

-93

19

93

-94

19

94

-95

19

95

-96

19

96

-97

19

97

-98

19

98

-99

19

99

-00

20

00

-01

20

01

-02

20

02

-03

20

03

-04

20

04

-05

20

05

-06

20

06

-07

20

07

-08

Pe

rce

nta

ge G

row

th

Years

Export quantity Cumulative Growth (In %)

Export Value Cumulative Growth (In %)




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TABLE 5

IMPORT OF RAW CASHEW-NUT FROM INDIA

Year

Import Quantity

(In M.T.)

Import

Value

(In Rupees

in Lukas)

Import quantity

Cumulative

Growth

(In %)

Import Value

Cumulative

Growth

(In %)

1990-91 82639 13400

1991-92 106080 26668 128.36 199.01

1992-93 134985 37633 163.34 280.84

1993-94 191322 48270 231.51 360.22

1994-95 228109 69094 276.03 515.62

1995-96 222819 76008 269.62 567.22

1996-97 192285 64060 232.68 478.05

1997-98 224968 74400 272.22 555.22

1998-99 181009 68024 211.03 507.64

1999-00 200584 95352 242.72 711.58

2000-01 249318 96080 301.79 717.01

2001-02 356566 96001 431.47 716.42

2002-03 400659 123657 484.83 922.81

2003-04 452898 140093 548.04 1045.47

2004-05 478884 218324 579.48 1629.58

2005-06 565400 216295 684.18 1614.14

2006-07 592604 181162 717.09 1351.95

2007-08 605970 174680 733.27 130.35

Compound 114.62% 178.06%




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Growth


FIGURE 4

IMPORT OF RAW CASHEW

Table 4 depicts the growth of import of raw cashew-nut which is showing continuous

fluctuation. But during the period from 1990-91 to 2007-08, it is showing increasing trend in

terms of quantity as well as value.

6. RESULTS AND DISCUSSION

6.1 ASYMMETRIES IN PRODUCTION, IMPORT AND EXPORT OF CASHEW

The asymmetries have been analyzed as the effects of globalization on the production of cashew,

export of cashew, import of raw cashew etc. In India, the policy of globalization has been

adopted by introducing Economic Policy 1991. So the year 1991 has been taken as the base year

for computing the impact of globalization on different variables. The data have been divided in

to two periods i.e. pre-globalization period (period of seventeen years before 1991: 1974 to

1990) and post-globalization period (period of seventeen years after 1991:1991 to 2007).

0

200

400

600

800

1000

1200

1400

1600

1800

19

90

-91

19

91

-92

19

92

-93

19

93

-94

19

94

-95

19

95

-96

19

96

-97

19

97

-98

19

98

-99

19

99

-00

20

00

-01

20

01

-02

20

02

-03

20

03

-04

20

04

-05

20

05

-06

20

06

-07

20

07

-08

Pe

rce

nta

ge G

row

th

Years

Import quantity Cumulative Growth in (%)

Import Value Cumulative Growth in (%)




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TABLE 6

DISTRIBUTION OF PRODUCTION, EXPORT AND IMPORT OF CASHEW IN INDIA:

THE COMPARISON OF PRE-GLOBALIZATION AND POST-GLOBALIZATION

PERIOD

Particulars

Pre-globalization Period

(1974 to 1990)

Post-globalization Period

(1991 to 2007)

Mean

Medi

an

Mod

e

skewn

ess

Mea

n

Medi

an

Mod

e

skewne

ss

Distribution of production

of cashew

13545

1

1957

60

6327

3

-

0.4274

9

2945

90

4500

00

7608

20 -0.0851

Distribution of export of

cashew kernel 23934

3705

4

6329

4

-

0.5889

4

4790

8

8166

1

1491

67

-

0.2520

58

Distribution of import of

cashew

15814

4

4260

9

7292

6

-

1.6665

2735

12

2281

09

3643

18

0.3897

86

FIGURE 5

ASYMMETRIES IN PRODUCTION, IMPORT AND EXPORT OF CASHEW

INDIA’s

PRODUCTION OF CASHEW FOR 34 YEARS (1974-2007)

NEGATIVELY SKEWED DISTRIBUTION




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Pre-Globalization (1974-1990) X= quantity Y= year Post-Globalization (1991-2007)

INDIA’s

EXPORT OF CASHEW KERNEL FOR 34 YEARS (1974-2007)

NEGATIVELY SKEWED DISTRIBUTION

0

50000

100000

150000

200000

1974 1976 1978 1980 1982 1984 1986 1988 1990

0

100000

200000

300000

400000

500000

600000

700000

1991 1993 1995 1997 1999 2001 2003 2005 2007




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Pre-Globalization (1974-1990) X= quantity Y= years Post-Globalization (1991-2007)

INDIA’S

IMPORT OF CASHEW FOR 34 YEARS (1974-2007)

NEGATIVELY& POSITIVELY SKEWED DISTRIBUTION

0

10000

20000

30000

40000

50000

60000

70000

1974 1976 1978 1980 1982 1984 1986 1988 1990

0

20000

40000

60000

80000

100000

120000

140000

1991 1993 1995 1997 1999 2001 2003 2005 2007




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Pre-Globalization (1974-1990) X= quantity Y= years Post-Globalization (1991-2007)

6.1.1 Distribution Of Production Of Cashew Of India

In pre-globalization period as well as post-globalization period, the distribution of cashew is

negatively skewed. It shows that the growth of India’s production of cashew-nut has decreased.

The trend reveals that the fluctuation in production has decreased in the period after 1991 as

compared to the period before 1991 (Table 6). It also projects that India’s cashew production has

grown slowly.

6.1.2 DISTRIBUTION OF EXPORT OF CASHEW KERNEL FROM INDIA

India had monopoly in the exporting of cashew kernels until Mozambique, Tanzania and Kenya

setup up their own plants and started processing an increasing share of their local production of

raw cashew nuts and exporting kernels aboard. In addition the entry of Brazil and, to smaller

0

20000

40000

60000

80000

100000

120000

140000

160000

180000

200000

1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990




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extent china, in to the kernel export business has resulted in a significant deterioration of India,

share of the world cashew kernel trade. India now accounts for only 45-50 percent of world

export of cashew kernel (as compared to 90-95 percent some ten year ago). There are several

problems conspiring to adversely affect India’s exports: (i) dwindling indigenous production of

raw cashew-nuts (ii) non-competitive pricing of Indian cashews on the world market, especially

compare to Brazilian cashew kernel (iii) increasing domestic consumption of cashew in India

and (iv) monopoly procurement policies of the Government of Kerala as the single largest

producer of raw nuts in India (Deolalikar, 1994).

The distribution of India’s export of cashew before 1991 as well as after 1991 is negatively

skewed. It shows that the growth of India’s export of cashew kernel has been decreased. It also

implies that the fluctuation in export has decreased in post-globalization period as compared to

pre-globalization period (Table 6). It indicates that India’s export of cashew is little bit improved

after globalization.

6.1.3 DISTRIBUTION OF IMPORT OF CASHEW IN INDIA

The domestic supply of raw nuts is inadequate to meet the total requirement of the processing

factories. The Indian processing industry has always relies heavily on imports of raw cashew-

nuts mostly from East Africa (Deolalikar, 1994). The distribution of India’s import of cashew in

pre-globalization is negatively skewed. It shows that the growth of India’s import of cashew has

been decreased. The distribution of India’s import of cashew in post-globalization is positively

skewed. It shows that the growth of India’s import of cashew has been increased (Table 6).

6.2 IMPACT OF GLOBALIZATION ON PRODUCTION, EXPORT AND IMPORT OF

CASHEW

There are economic asymmetries in India’s foreign trade of cashew. These asymmetries have

been tested in terms of the variation in production, export and import of cashew in India for

which purpose the following sub-hypotheses have been tested by administering single pair and

one-tail t-test.

6.2.1 HYPOTHESIS-1

H0- There is no significant difference in the production of cashew in India between the pre-

globalization period and the post- globalization period.

Ha- There is significant difference in the production of cashew in India between the pre-





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Particulars t value Degree of Freedom Level of Significance

Production of cashew -17.393 16 .000

PRODUCTION OF CASHEW: T test indicates that, the null hypothesis should be rejected

because its t- value is -17.393, df = 16 and level of significance = .000. It leads to accept

alternative hypothesis.

6.2.2 HYPOTHESIS-2

H0- There is no significant difference in the export of cashew in India between the pre-


Ha- There is significant difference in the export of cashew in India between the pre- globalization

period and the post- globalization period.


Export of cashew kernel -6.884 16 .000

T test indicates that, the hypothesis should be rejected because its t- value is –6.884 df = 16 and

level of significance = .000. It leads to accept alternative hypothesis.

6.2.3 HYPOTHESIS-3

H0- There is no significant difference in the import of cashew in India between the pre-


Ha- There is significant difference in the import of cashew in India between the pre- globalization

period and the post- globalization period.


Import of cashew -4.520 16 .000

T test indicates that, the hypotheses should be rejected because its t- value is -4.520 df = 16 and

level of significance = .000. It leads to accept alternative hypothesis.

10. CONCLUSION

India is major player in international cashew market in respect of cashew production, import and

export. There are some asymmetries in India’s foreign trade of cashew in respect of production,




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import & export in the context of globalization. The globalization has an impact on the cashew-

nut industry in India as well as some other countries. The empirical study shows that most of the

countries importing cashew kernel (consuming) are developed countries whereas most of the

countries which are exporting cashew kernel are developing or underdeveloped countries

(Mahajan et. al., 2010). The analysis indicates that there is regional imbalance in cashew

production in the world in general and in India in particular. The continuous process of

globalization is throwing up various challenges and opportunities to almost all the industries. The

asymmetries are increasing in post-globalization period. Before this industry there are some

problems like lack of infrastructure ability, lack of supply of raw cashew, lack of availability of

finance, collection of raw cashew, unavailability of warehouse, marketing of cashew kernels,

lack of technical knowledge etc.

But the globalization put forth some opportunities such as: (i) increase in Cashew cultivation and

cashew production, (ii) employment generation, (iii) formation of cashew processing unit, (iv)

alcohol production from cashew apple, (v) shield oil production, (vi) transportation facility for

cashew industry etc. This industry has domestic as well as foreign market. India has tremendous

potential in this regard. The globalization has an impact on the industry as a result of the

economic asymmetries in trade of cashew. Foreign trade of cashew has been contributing Indian

economy by earning valuable foreign exchange. The steps to stimuli for cashew-nut industry are

required in the form of arranging campaign for awareness of cottage industry, strategy to

increase domestic consumption, strengthening the channel of market information and extra

initiative from the Ministry of Commerce and Trade, Government of India. Therefore strong

efforts are required to make sustainable the Indian cashew industry in the context of

globalization to face challenges and grab the opportunities.

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Economic Asymmetry of Cashew

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