Israel-Iran Truce Revived Indian Tea Exports

Syllabus Areas:

GS II - IR

GS III - Economy

The Israel-Iran conflict caused a sudden drop in demand for Indian orthodox tea, especially from Iran – a major market. After the ceasefire announcement, there are signs of recovery: buyers are returning, auction sales are improving, and prices are stabilizing.

  • Orthodox tea prices rose from ₹269.40/kg (last week) to ₹290.66/kg.
  • Despite this, 49% of teas were unsold at auctions held on June 24–25 (compared to 49.26% earlier in June).

Demand Resumption:

  • Exporters were in a “wait-and-watch” mode.
  • The ceasefire announcement helped resume demand from pending orders.
  • Exporters expect gradual improvement as buyers from Iran, UAE, and Commonwealth countries return.

Why is Iran important?

  • One of the top 3 importers of Indian orthodox tea (premium variety grown mostly in Assam and Darjeeling).
  • Has historically imported 20–25 million kg per year from India.
  • 2023 saw a sharp drop due to geopolitical tensions

 Strategic Importance of Iran for Indian Tea:

Year Exports to Iran (in million kg)
2022 22.21 mkg
2023 5.29 mkg (↓ due to conflict)
2024 9.24 mkg (↑ post partial recovery)
  • Tea from India is part of Iran's cultural consumption, making it a steady but sensitive market.

Auction Dynamics

  • India’s orthodox tea is primarily sold via Kolkata tea auctions.
  • The auction system gives real-time price discovery, crucial for small and medium producers.
Sale Dates Quantity Sold (%) Avg Price (₹/kg)
June 3-4 92.03% ₹322.16
June 10-11 88.23% ₹316.67
June 17-18 49.62% (conflict peak) ₹269.40
June 24-25 75.85% (post truce) ₹290.66

Observation:

  • Prices fell ~16% during peak tensions.
  • Sales volume halved, reflecting uncertainty among buyers.

Exporters' Sentiment

  • Exporters were hesitant to ship due to:
  • Payment delays,
  • Shipping bottlenecks,
  • Risk of port closures.

After ceasefire:

  • Pending orders resumed,
  • Buying restarted ahead of auctions,
  • Traders optimistic but still cautious

Geopolitical Linkages

  • This situation shows how international conflicts directly impact India’s trade, even in non-oil sectors.
  • Disruptions in West Asian geopolitics (like Iran-Israel tension) can damage:
    • India’s export volumes,
    • Shipping routes (like via Strait of Hormuz),
    • Payment security (sanctions, SWIFT bans, etc.).
  • Tea was rerouted via UAE to avoid instability – an example of trade route flexibility.

Wider Implications for Economy & Policy

Microeconomic:

  • Orthodox tea prices are high-value, so even small shocks affect incomes of small growers and estates in Assam, Bengal, and Nilgiris.
  • Drop in exports impacts employment in tea plantations and packing units.

Macroeconomic:

  • Export reduction affects foreign exchange earnings.
  • Creates trade imbalance with Middle Eastern countries.

Strategic Suggestions:

  • Diversify export markets beyond Iran (e.g., Russia, Egypt, CIS countries).
  • Set up payment protection schemes for exporters in conflict zones.
  • Use diplomatic backchannels (via UAE, Chabahar) to ensure stable trade corridors.
  • Promote tea as a soft power tool in West Asia and Central Asia.
  • Strengthen India’s export intelligence networks to predict and prepare for shocks.

Mains Question:

Q. Examine the impact of geopoptical developments on India’s agricultural exports with special reference to orthodox tea.” 150 Words 10 Marks