India is the second-largest producer of tea after China, with iconic varieties from Darjeeling and Assam. Yet, despite its natural advantages, India’s global tea industry presence lags behind Sri Lanka in branding, market power, and pricing.

Challenges Facing India’s Global Tea Competitiveness

• Global Comparison:
  • Sri Lanka’s Edge: Produces only one-third of India’s annual tea output, yet two Sri Lankan companies feature among the world’s top-10 exporters; India has just one (Tetley, acquired by Tata in 2000).
  • Brand Power: Sri Lanka’s Dilmah is a successful indigenous global brand, while India has failed to build a strong international tea identity.
  • Value vs. Volume: In 2024, India overtook Sri Lanka as the second-largest exporter by volume, but still ranks fourth by value behind China, Sri Lanka, and Kenya.
• Structural Weaknesses:
  • Protectionism Legacy: Decades of import bans kept domestic prices high and insulated Indian producers, stifling innovation and competitiveness.
  • Soviet Dependency: Until 1991, exports were largely secured by the Soviet Union’s rupee-rouble trade, which collapsed after liberalisation.
  • Product Focus: India mostly produces crush-tear-curl (CTC) tea, suited to domestic chai, whereas global markets value leaf tea, Sri Lanka’s specialty.
• Current Challenges:
  • US Tariffs: A new 50% tariff on Indian tea in the United States threatens India’s second-largest overseas market (11% share).
  • Climate Change: Rising temperatures, erratic rainfall, and labour shortages are hurting productivity and raising costs.
  • Nepal’s Competition: Imitation Darjeeling tea from Nepal is undermining India’s premium segment.
  • Declining Estates: Serial closures of storied estates since 2000 highlight the sector’s long-term decline.

Industry Adjustments

• Reform Attempts: Larger companies are moving towards value addition, branding, and tea tourism (luxury bungalows, premium labels).
• Import Policy Shift: Imports are now allowed under advance authorisation schemes, though still subject to 100 percent customs duty plus 10 percent surcharge, worrying domestic producers.
• Changing Aspirations: Tea estates have lost their old prestige and are no longer attractive careers for India’s young elite.

The Path Ahead

• Brand Building: India needs strong national and regional brands that highlight provenance, flavour, and sustainability.
• Product Diversification: Shift towards leaf teas and specialty variants that appeal to global markets, not just domestic chai consumption.
• Policy Reorientation: Move away from excessive protectionism, invest in global competitiveness and climate adaptation.
• Climate-Resilient Practices: Focus on sustainable farming, labour reforms, and resilient varieties to secure long-term viability.

Conclusion

Despite its heritage, India’s tea industry risks ceding space to Sri Lanka and Nepal in global markets. Without branding, diversification, and climate resilience, India may remain a volume leader but never achieve value leadership in the global tea trade.

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