India is the world’s largest producer of tea producing about 950 million Kgs. per annum. Tea contributes about Rs.7000 Crore per annum to India’s GNP with an annual export earnings of Rs.2000 Crore. It provides direct employment to about 12 lakh people, mostly in rural, remote and hilly areas and 2nd highest employment provider to labours after Railways.

Domestic consumption of India grows @ 3.3% CAGR and per capita consumption comes to about 750 grams which is low when compared to the per capita consumption of other countries like Pakistan where the per capita consumption is more than one Kg. Thus a lot of room is available for the growth in consumption of tea in the domestic market.

India exported about 150 million Kgs. of tea in 2007. Current year target set for export is 180 milion Kgs.

The Indian Government has taken the initiative of launching SPTF (Special Purpose Tea Fund) of Rs.4700 crores to provide tea companies with long term cheaper loan along with subsidies for the development in their field. This would enable them to increase the yield per hectare of land available for tea plantation, which would eventually decrease the cost of production per Kg. to make Indian tea price competitive with world tea prices.

Given the consistent growth of domestic consumption @ 3.3% CAGR, it is likely that we could see shortage in supply of tea in India which would have its direct impact  on its price realization.