researcharticle International Journal of Commerce and Business Management (October, 2010) Vol.

3 Issue 2 : 252-257

Export of performance of Indian chilli

N.P. MENDHE AND A.M. DEGAONKAR
Accepted : September, 2010

ABSTRACT
There is immense scope to expand India’s export potential of chilli (Capsicum annuum L.) and detailed analyses of export trade
of this chilli have been studied. High priority should be given to increase the production and productivity of chilli. This is
necessary to meet the increasing domestic demand on one hand and to build up a sustained supply to meet international
markets for earning foreign exchange through chilli export in other hand. Markov chain analysis revealed that there is huge
scope to expand the export of chilli to Malaysia, Sri Lanka, Singapore, USA, UK and other countries. Therefore, appropriate
export promotion strategies have to be evolved to diversify the geographical concentration for chilli export. Also steps should
be initiated to capture the world markets on a sustained basis through international trade fair, exhibitions can be arranged to
gain knowledge about quality preferences and thereby measures can be taken to export chilli in the needy market.

Key words :

C hilli (Capsicum annuum L.) is one of the most

important spice crops in India. Its origin is in Mexico.
It is grown and cultivated from 3500 BC. Mexicans used
it to spice up their food. Christopher Columbus who
discovered America in 1493 brought chilli to the rest of
the world. Dry chilly is extensively used as spice in curried
dishes. It is also used as an ingredient in curry powder
and in seasonings. Bird chilly is used in making hot sauces
as pepper sauce and tabsco sauce. In 1912, Wilbur L.
Scoville, a pharmacist found a new method to measure
the pungency of the chilli. This new method came to be
known as Scoville Organoleptic Test. There are more
than 400 different varieties of chillies found all over the
world. The world’s hottest chilli “Naga lolokia” is cultivated
in hilly terrain of Assam in a small town Tezpur, India.
Indian chilli has been dominating international chilli market.
Majority of chilli grown in India is cultivated in states
such as Andhra Pradesh, Maharashtra, Karnataka,
Gujarat, Tamil Nadu and Orissa. The demand for Indian
chilli in the market of Malaysia, Bangladesh, Sri Lanka
and USA have been growing on an average between 20
to 25 per cent because of its quality and price
competitiveness. The major chilli producing states in India
namely Andhra Pradesh, Karnataka, Maharashtra, Orissa,
Rajasthan and Tamil Nadu. The export potential of chilli
Co rre spo ndenc e to:
D.B. PAWAR, Department of Agricultural Economics and
Statistics, Ra jiv Ga ndhi College of Food Technology,
PARBHANI (M.S.) INDIA
Autho rs’ affiliations:
B.R. PAWAR, Department of Agricultural Economics and
Statistics, Ra jiv Ga ndhi College of Food Technology,
PARBHANI (M.S.) INDIA

HIND INSTITUTE OF COMMERCE AND BUSINESS MANAGEMENT

has enormously increased with the liberalization of trade.
Chilli is predominantly an Asian crop produced extensively
in South - East Asian countries extending from India to
Malaysia, UAE, Sri Lanka, Singapore and UK, account
for the major share of exports from India. India is the
first largest producer of chilli Thus, there is immense scope
to expand India’s export potential of chilli and detailed
analyses of export trade of this chilli have not been studied.
Hence, the present study was initiated with the following
objectives.
– To study the direction of trade and changing pattern
of chilli export,
– To study export competitiveness of chilli in global
major market, and 3. To study constraints associated with
export of chilli.
METHODOLOGY
Direction of trade:
The structural change in export was examined by
using Markov chain approach under exportable hypothesis,
the pre-assumption is that Indian chilli could compete with
the international chilli market. Therefore, chilli price must
be low enough to make it competitive in foreign market.
The Entropy Index is
E (I) = Theil’s Entropy Index = Pi log (1/Pi)
It is inverse measure of concentration having
logarithmic character for increasing diversification E (I)
is increasing. It is also found between 0 and 1.
Xi
Pi = n X
∑ i =1 i
where
 N.P. MENDHE AND A.M. DEGAONKAR
Xi = Quantity of exports extended to the ‘ith’ country.
Xi = Total quantity exports
N = Number of years.
E (I) = Theil’s entropy.
Its value range between 0 and log n, where 0 present
perfect concentration and vice-versa..
Analysis of export competitiveness:
Competitiveness is the ability of a nation to grow
successfully and to maintain its share of world trade. The
export competitiveness of chilli has been assessed by using
Nominal Protection Coefficient (NPC). The export
competitiveness was estimated by using nominal
protection coefficient (NPC) as a measure of export
market competitiveness. It was computed as
Nominal protection = Domestic price (DP)
coefficient Border price (BP)
253
– High domestic price
– Improper international market information
– Lack of future trading and prior agreement
Ranks assigned by sampled exporters for above-
mentioned constraints was analyzed by using Kendall’s
coefficient of concordance test. Kendall’s coefficient of
concordance test (W) can be calculated as follows:
12 (Ri – R)2
W=
k 2 (N 3 – N)
where,
R= Mean of the ranks assigned to constraints
k = Number of exporters selected
N = Number of constraints
Ri = Rank given to ith constraint
c2 - test will be used for testing the significance of
W as follows:
c2 = k (N - 1) W at (N - 1) degrees of freedom.

where, FINDINGS AND DISCUSSION

BP = Border price (After adjusting the transport and
marketing cost to FOB prices)
FOB = Free on Board
When NPC < 0.5 then the commodity under
consideration is highly competitive, NPC between 0.5 -
1.0 then the commodity is moderately competitive and
NPC > 1 then the commodity is non-competitive.
Constraints in export of chilli:
The constraints being faced by the exporters of chilli
have been identified and well designed questionnaire. The
constraints identified are
– Lack of demand from importing countries
– Lack of phyto-sanitary measures
– Lack of export promotional measures Lack of
infrastructure facilities
– Problem of maintenance of quality consistently
– Lack of adequate processing and packaging
– Preferential tariffs followed by importing countries
The findings of the present study as well as relevant
discussion have been summarized under following heads:
Direction of trade and changing pattern of Indian
chilli exports:
The time period considered for country-wise export
of chilli in the investigation is eight years (1999-00 to 2007-
08). Using Markov chain approach, transition probabilities
were estimated for dry chilli, chilli powder and oleoresins
of chilli.
Dry chili:
The eight major importing countries taken for the
analysis of trade in day chilli were Malaysia, Pakistan,
Sri Lanka, UAE, USA, Singapore, Indonesia and others
countries (remaining countries). The transitional
probabilities for export of quantity of dry chilli are
presented in Table 1 whichu depicts a broad indication of
the changes in the direction of the trade of dry chilli.

Table 1: Transitional probability matrix for dry chilli

Countries Malaysia Pakistan Sri Lanka UAE USA Indonesia Singapore Other countries
Malaysia 0.2140 0.1844 0.0000 0.0000 0.0000 0.0757 0.0853 0.4406
Pakistan 0.0000 0.2450 0.0000 0.0068 0.0130 0.1251 0.0000 0.6100
Sri Lanka 0.0000 0.1611 0.6273 0.0000 0.0000 0.0000 0.0000 0.2116
UAE 0.0580 0.0472 0.0130 0.2004 0.0000 0.0000 0.0000 0.6814
USA 0.0891 0.1518 0.0364 0.0216 0.1500 0.0000 0.1 050 0.4459
Indonesia 0.1479 0.0364 0.0955 0.0000 0.0000 0.7202 0.0000 0.0000
Singapore 0.0434 0.0164 0.0000 0.1472 0.0000 0.0000 0.2368 0.5562
Other countries 0.0590 0.3090 0.1735 0.0000 0.0029 0.0000 0.0427 0.4129

Internat. J. Com. & Bus. Manage., 3(2) October, 2010
HIND INSTITUTE OF COMMERCE AND BUSINESS MANAGEMENT

254 EXPORT OF PERFORMANCE OF INDIAN CHILLI

It is seen from the Table 1 that the transition
probability matrix indicated that India retained its export
of dry chilli share proportion to Indonesia (72.02 per cent)
during the study period. The other share of Indonesia
market was diverted to Malaysian (14.79 per cent) and
Sri Lanka (9.55 per cent) markets. India’s previous dry
chilli exports to the Sri Lanka market was retained to the
tune of about 62.73 per cent during the current period.
Of the remaining, our share of Sri Lank market was
diverted to other countries (21.16 per cent) and Pakistan
(16.11 per cent). A major share of Malaysian imports of
dry chilli from India was retained to the tune of about
21.40 per cent during the current period. Of the remaining
our share of Malaysia market was diverted to other
countries (44.06 per cent) and Pakistan (18.44 per cent).
During the current period India’s dry chilli exports to UAE,
Singapore and USA were retained to the tune of 20.04,
23.68 and 15.00 per cent, respectively. On the other hand
41.29 per cent was retained for other countries.
Chilli powder:
The eight major chilli powder importing countries
were taken for the analysis of trade in, viz., Italy, Canada,
Sri Lanka, UAE, UK, USA Singapore a others countries
(remaining countries). The transitional probabilities for
export of quantity of chilli powder are presented in Table
2.
From Table 2, the transition probability matrix
indicated that India retained its export of chilli powder
share proportion to Italy (43.15 per cent) during the study
period. The other share ofItaly market was diverted to
other countries (29.89 per cent) and Canada (19.88 per
cent) markets.
India’s previous chilli powder exports to the Singapore
market was retained to the tune of about 38.86 per cent
during the current period. Of the remaining our share of
Singapore market was diverted to other countries (38.44
per cent) and Sri Lank (22.70 per cent). A major share of
UAE imports of chilli powder ITom India was retained to
the tune of about 32.18 per cent during the current period.
Of the remaining our share of UAE market was directed
to other countries (36.14 per cent) and USA (20.72 per
cent).
During the current period India’s chilli powder exports
to other countries, USA, UK, Canada, and Sri Lanka
markets were retained to the tune of 50.68, 24.89, 20.00,
15.74 and 5.72 per cent, respectively.
Oleo resins of chilli:
The eight major importing countries taken for the
analysis of trade in oleoresins of chilli were China, France,
Singapore, UK, USA, South Korea and others countries
(remaining countries). The transitional probabilities for
export of quantity of oleoresins of chilli are presented in
Table 3. The transition probability matrix indicated that
India retained its export of oleoresins of chilli share
proportion to USA (83.68 per cent) during the study period.
The remaining share of USA market was diverted to other
countries (11.32 per cent) and France (5.00 per cent)
markets.
India’s previous oleoresins of chilli exports to the
UK market were retained to the tune of about 47.80 per
cent during the current period of the remaining our share
of UK market was diverted to other countries (34.50 per
cent) and France (10.28 per cent).During the current
period, India’s oleoresins of chilli exports to other
countries, France, Singapore and other countries markets
were retained to the tune of 31.47,24.14 and 40.42 per
cent, respectively. India was unable to retain its export
share of oleoresins of chilli in the countries China, Spain
and South Korea.
Competitiveness of chilli:
Competitiveness is the ability of a nation to grow
successfully and to maintain its share in world trade. Using
Nominal Protection Coefficient (NPC) the export
competitiveness of chilli was assessed for estimation of
border price for export of dry chilli, Hyderabad market

Table 2: Transitional probability matrix for chilli powder

Countries Malaysia Pakistan Sri Lanka UAE USA Indonesia Singapore Other countries
Italy 0.4315 0.1988 0.0216 0.0465 0.0000 0.0027 0.0000 0.2989
Canada 0.0658 0.1574 0.2867 0.0000 0.1246 0.0099 0.0000 0.2665
Sri Lanka 0.0087 0.0029 0.0572 0.0000 0.1078 0.00592 0.0450 0.7192
UAE 0.0156 0.0000 0.0797 0.3218 0.0142 0.2072 0.0000 0.3614
UK 0.0981 0.0000 0.0000 0.0000 0.2000 0.1734 0.0555 0.4730
USA 0.0000 0.1516 0.0000 0.0000 0.0000 0.2489 0.0000 0.5995
Singapore 0.0000 0.0000 0.2270 0.0000 0.0000 0.0000 0.3886 0.3 844
Others countries 0.0000 0.0472 0.2959 0.0133 0.0000 0.1367 0.0000 0.5068

Internat. J. Com. & Bus. Manage., 3(2) October, 2010
HIND INSTITUTE OF COMMERCE AND BUSINESS MANAGEMENT

 N.P. MENDHE AND A.M. DEGAONKAR 255

Table 3: Transitional probability matrix for oleoresins of chilli

Countries Malaysia Pakistan Sri Lanka UAE USA Indonesia Singapore Other countries
China 0.0000 0.0660 0.2229 0.2815 0.0000 0.0012 0.0000 0.4220
France 0.0000 0.3147 0.0000 0.0000 0.3797 0.0000 0.0000 0.3055
Singapore 0.0000 0.0659 0.2417 0.1151 0.0000 0.0000 0.0000 0.5753
USA 0.0000 0.0500 0.0000 0.8368 0.0000 0.0000 0.0000 0.1132
UK 0.0000 0.1028 0.0000 0.0000 0.4780 0.0000 0.0742 0.3450
Spain 0.0000 0.5439 0.3464 0.1097 0.0000 0.0000 0.0000 0.0000
South Korea 0.0000 0.8149 0.0000 0.0000 0.1849 0.0000 0.0000 0.0000
Others countries 0.0000 0.0000 0.0000 0.0561 0.1611 0.3786 0.0000 0.4042

Table 3: Transitional probability matrix for oleoresins of chilli

Countries Malaysia Pakistan Sri Lanka UAE USA Indonesia Singapore Other countries
China 0.0000 0.0660 0.2229 0.2815 0.0000 0.0012 0.0000 0.4220
France 0.0000 0.3147 0.0000 0.0000 0.3797 0.0000 0.0000 0.3055
Singapore 0.0000 0.0659 0.2417 0.1151 0.0000 0.0000 0.0000 0.5753
USA 0.0000 0.0500 0.0000 0.8368 0.0000 0.0000 0.0000 0.1132
UK 0.0000 0.1028 0.0000 0.0000 0.4780 0.0000 0.0742 0.3450
Spain 0.0000 0.5439 0.3464 0.1097 0.0000 0.0000 0.0000 0.0000
South Korea 0.0000 0.8149 0.0000 0.0000 0.1849 0.0000 0.0000 0.0000
Others countries 0.0000 0.0000 0.0000 0.0561 0.1611 0.3786 0.0000 0.4042

was selected and data were collected from National
Informatics Centre, Hyderabad.
Dry chilli:
Year-wise border prices for dry chilli were computed
and and presented in Table 4. Using the border price given
in Table 4, NPC for dry chilli were computed for major
dry chilli importing countries. From Table 5, it is revealed
that the NPC for dry chilli remained below 1.00 under
the study period. This’lHdicates that there was wide
scope for increasing the export of dry chilli. The NPC
for the countries like Malaysia, Pakistan, Sri Lanka, UAE,
USA, Singapore, Indonesia and others countries
(remaining countries) were less than one, i.e., moderately
competitive. These were more competitive markets for
Indian dry chilli. These results were consistent with a
similar study conducted by Anonymous, 2005, Shivaraya
(2000), and Hemajyohi et al. (2003). The average NPC
for different countries were also less than 1.00, hence,
export of dry chilli is moderately competitive.
Year-wise border prices for chilli powder were
computed and are presented in Table 6. llsing the border
price given in Table 6, NPC for chilli powder were
computed for major chilli powder importing countries and
are presented in Table 7. It revealed that the NPC for
dry chilli under exportable period remained below 1.00.
This indicates that there was wide scope for increasing
the export of dry chilli. The NPC for the countries Italy,
Canada, Sri Lanka, UAE, UK, USA Singapore and others
countries (remaining countries) were less one indicating
moderately competitive. These were more competitive
markets for Indian chilli powder. These results were
consistent with a similar study conducted by Shivraya
(2000) and Hema Jyothi et al. (2003). The average NPC

Table 4 : Border price for dry chilli (After adjusting the transport and marketing cost to FOB prices)
Years/ countries Unit 2001-02 2002-03 2003-04 2004-05 2005-06
Wholesale price at Hyderabad Rs. / q 3005 3164 3812 4185 4427
Transportation cost, packing and handling Rs./ q 208 223 241 269 287
Marketing cost @ 5% Rs. / q 160 168 190 209 221
Equal FOB price Rs. / q 3573 3755 4243 4663 4935
Freight from India Rs. / q 98 99 103 105 108
Insurance @ 1 % of price Rs. / q 36 38 42 47 49
Equal landed price Rs. / q 3507 3692 4388 4815 5092

Internat. J. Com. & Bus. Manage., 3(2) October, 2010
HIND INSTITUTE OF COMMERCE AND BUSINESS MANAGEMENT

256 EXPORT OF PERFORMANCE OF INDIAN CHILLI

Table 5: Nominal Protection Coefficient (NPC) for dry chilli

Years / countries 2001-02 2002-03 2003-04 2004-05 2005-06 Mean NPC
Malaysia 0.96 0.97 0.81 0.84 0.63 0.84
Pakistan 0.97 0.98 0.84 0.88 0.78 0.89
Sri Lanka 0.98 0.96 0.97 0.90 0.87 0.94
UAE 0.84 0.83 0.84 0.81 0.83 0.83
USA 0.89 0.97 0.92 0.89 0.84 0.90
Indonesia 0.97 0.98 0.93 0.88 0.85 0.92
Singapore 0.93 0.97 0.92 0.89 0.85 0.91
Others countries 0.94 0.93 0.90 0.87 0.83 0.89

Table 6: Border price for chilli powder (After adjusting the transport and marketing cost to FOB prices)
Particulars Unit 2001-02 2002-03 2003-04 2004-05 2005-06
Wholesale price at Hyderabad Rs. / q 4034 4199 4311 4445 4621
Transportation cost, packing and handling Rs. / q 161 164 172 177 181
Marketing cost @ 5% Rs. / q 202 210 216 223 226
Equal FOB Price Rs. / q 4397 4573 4699 4845 5028
Freight from India Rs. / q 101 104 107 110 118
Insurance @ 1 % of price Rs. / q 40 42 43 44 50
Equal landed Price Rs. /q 4538 4719 4849 4999 5196

Table 7: Nominal Protection Coefficient (NPC) for chilli powder

Years / Countries 2001-02 2002-03 2003-04 2004-05 2005-06 Mean NPC
Italy 0.88 0.90 0.91 0.84 0.80 0.87
Canada 0.94 0.94 0.96 0.89 0.84 0.91
Sri Lanka 0.96 0.95 0.95 0.88 0.83 0.91
UAE 0.96 0.96 0.93 0.88 0.82 0.91
UK 0.93 0.94 0.95 0.89 0.83 0.90
USA 0.94 0.97 0.94 0.86 0.82 0.91
Singapore 0.93 0.90 0.89 0.88 0.82 0.88
Others countries 0.97 0.96 0.94 0.90 0.87 0.93

for different countries were also less than 1.00, hence,
export of chilli powder was moderately competitive in
these countries.
Oleo resins of chilli:
The results are presented in Table 8 which indicate
that there was wide scope for increasing the export of
oleoresins of chilli. The NPC for the countries Italy,
Canada, Sri Lanka, UAE, UK, USA Singapore and others
countries (remaining countries) were less than one
indicating moderately competitive. These were more
competitive markets for Indian oleoresins of chilli. These
results were consistent with a similar study conducted by
Shivraya (2000) and Hema Jyothi et al. (2003).The
average NPC for different countries were also less than
1.00, hence, export of oleoresins of chilli was moderately
competitive in these countries.
Constraints associated with export of chilli:
The constraints being faced by the exporters of chilli
were identified and ranks were assigns by sampled
exporters were analysed. The data were analyzed by using
Kendall’s coefficient of concordance test. Kendall’s
coefficient of concordance test (W) calculated as follows:
W = 2.4059
χ2 -test used for testing the significance of W was
given following value
χ2 = 281.49** at 9 degrees of freedom
Since χ2- test is significant at 5% and 1% level of
significance, we can conclude that all the exporters were

Internat. J. Com. & Bus. Manage., 3(2) October, 2010
HIND INSTITUTE OF COMMERCE AND BUSINESS MANAGEMENT

 N.P. MENDHE AND A.M. DEGAONKAR 257

Table 8 : Nominal Protection Coefficient (NPC) for oleoresins of chilli

Years/ countries 2001-02 2002-03 2003-04 2004-05 2005-06 Mean NPC
China 0.88 0.96 0.96 0.94 1.02 0.95
France 0.92 0.78 0.80 0.81 0.85 0.83
Singapore 0.84 0.88 0.84 0.83 0.90 0.86
USA 0.88 0.72 0.81 0.84 0.86 0.82
UK 0.91 0.88 0.88 0.84 0.82 0.87
Spain 0.93 0.93 0.94 0.95 0.92 0.93
South Korea 0.90 0.87 0.94 0.98 1.02 0.94
Other countries 0.84 0.80 0.81 0.84 0.84 0.83

in agreement in ranking of constraints in chilli exports. Table 9 : The average rankings given by exporters for
The average rankings given by exporters were given in identified constraints / Problems
Table 9. Constraints Ranking
From Table 9, it revealed that lack of future reading Lack of future reading and prior agreement I
and prior agreement, high domestic price, problems in High domestic price II
maintenance of quality consistently, phyto-sanitary Problems in maintenance of quality consistently III
problem are the major obstacles in export of chilli. These Lack of adequate processing and packaging IV
results are consistent with a similar study conducted by Lack of phyto-sanitary measures V
Hema Jyothi et al. (2003). Improper international market information V
Preferential tariffs followed by importing countries VI
Conclusion: Lack of export promotional measures VII
– High priority should be given to increase the
Lack of infrastructural facilities IX
production and productivity of chilli. This is necessary to
Lack of demand from importing countries X
meet the increasing domestic demand on one hand and to
build up a sustained supply to meet international markets
for earning foreign exchange through chilli export in other export.
hand. – Appropriate steps should be initiated to capture
– The results of Markov chain analysis has huge the world markets on a sustained basis. Hence,
scope to expand the export of chilli to Malaysia, Sri Lanka, international trade fair, exhibitions can be arranged to gain
Singapore, USA, UK and other countries. Therefore, knowledge about quality preferences and thereby
appropriate export promotion strategies have to be evolved measures can be taken to export chilli in the needy market.
to diversify the geographical concentration for chilli

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1-35. Dharwad (Karnataka).
Hyma Jyothi, Raju, S.Y.T., Acharya, N.G. and Rang (2003). Export
performance of onion and potato from India. An
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HIND INSTITUTE OF COMMERCE AND BUSINESS MANAGEMENT