The economics of Geographical Indications
A study conducted by the Organisation for Economic Co-operation and Development (OECD) in the year 1995 identified a number of factors that influence the success of entrepreneurial endeavours. As per the collected data, the two main factors that influence the same are market access and differentiation. Geographical Indications (GIs) create differentiation based on product “qualities” and consequently contribute to the creation of niche markets. This serves as the main economic rationale in the protection of GIs. A GI, by differentiating products by its area of origin, restricting supply and creating barriers to entry, may act as a powerful marketing tool which could improve market access.
Creating a regulatory framework, aimed at preventing misappropriation of origin-based products and protecting the reputation of these products could potentially have a strong developmental impact through an improved income effect. This in turn has a direct role in augmenting the economy of a nation. However, unlike developed nations, the GI regime of developing nations is at a nascent stage. Thus, asserting the economic implications of the same in these countries is rather convoluted. Apart from institutional and legal efficiencies, these countries do not rely on niche markets for sustenance. India, at present boasts of a glorious lineage of over 350 granted GIs.
Darjeeling Tea was the first product in India to be awarded the GI tag in 2004-05. As of now, in India several goods, such as Darjeeling tea, Coorg orange, Nagpur orange, Mysore silk, Mysore Pak, Basmati rice, Mysore Mallige, Channapatna toys etc., have been accorded the same protection. The economic impact of GI protection is evident by the virtue of the fact that since its grant, Darjeeling tea has seen its domestic price rise five-fold. Moreover, basmati rice and Thanjavur paintings’ prices have doubled. Importantly, jobs based on them have increased. The number of farmers cultivating Nagpur ‘oranges’ has, for instance, doubled in the last five years.
However, the ability of increased revenue through GI protection is strongly dependent on the capacity of a nation to implement its effective enforcement. A study conducted by World Trade Report in India in the year 2004 affirms that GI protection increased the price of Darjeeling tea in total by a modest 1 per cent in real terms over the 1986-2002. According to the experts, this was due to the mismanaged enforcement initiatives carried out by the government. This dimension appears as particularly relevant from a developing country perspective.
The Indian GIs
The predominant role of a GI is to act as a product differentiator, aimed at capturing market sensibilities. While across the globe, countries are striving towards registering their GIs, India boasts of an unmatchable diversity in its GI protection. The granted GIs in India include textiles, handicrafts, paintings, agricultural products, horticultural products, beverages, among others. This is in sharp dissimilitude with the European scenario, where GIs predominantly relate to wines and spirits, or other food and agricultural products.
“Pochampally Ikat’: A revived GI
A classic example of the economic impact of GIs on an economy is by evidencing the case study of “Pochampally Ikat’. “Pochampally Ikat’ is a unique age‐old fabric (silk, cotton or combinations thereof) woven in the Nalgonda and Warangal districts of the Indian state of Andhra Pradesh. The fabric is made by a process of tying and dying the yarn prior to weaving. The industry accommodates over 1000 weaving households in Pochampally and an estimated 5000 weavers, working on approximately 2000 traditional pit looms. However, in the 1990s, the art of creating products out of the “Pochampally Ikat’ witnessed a striking decline. Low productivity of traditional pit looms, negligent market efforts etc. contributed to the obliteration of this industry. While creation of a warp of eight sarees made out of this fabric took over 45 days, wages provided to the weavers were excruciatingly low. In the year 2007, average income provided to a weaver for completing a warp of eight sarees would be as low as INR. 1500‐2500 (with US$1=INR 41.29 as in 2007). Eventually, in assistance with the Pochampally Handloom Tie and Dye Manufacturers’ Association’, ‘Pochampally Ikat’ was awarded GI registration on December 31, 2004, and became the first handloom product to get registered as a GI in India. Subsequent to the registration, the said fabric received huge publicity, which created immense demand. The demand for ‘Pochampally Ikat’ sarees increased by 15‐20% in the year 2008, also increasing the weaver wages by up to 20%. The impact of GIs on the economy of a nation is elucidated by the fact that the European Union has a USD 87 billion GI economy.
Measures and results
Another advantage of GI registration is the inspection standards offered by the virtue of the same. Both the Muga silk and Chanderi Fabrics in India are now under government scrutiny to augment growth by standardising quality control methods. The Chanderi Development Foundation (CDF) was created as the representative body for the whole Chanderi cluster. As per the data procured by the Foundation, stakeholders involved in the creation and sale of Chanderi Fabrics have started reaping considerable benefits out of the GI status. They maintain that the GI registration and subsequent publicity has increased the awareness in the Indian market about the authenticity or otherwise of the sarees being sold as ‘Chanderi’. Hence, many of the customers who were previously buying imitations unknowingly are now resorting to genuine ‘Chanderi Fabric’.
GIs may contribute to the establishment of a “regional brand”. For example, in India, cheap power loom-made sarees are sold as highly reputed “Banarasi” handloom sarees within and outside the Varanasi region.
Amazon’s local to global programme has taken Indian producers and their products such as Delta Leather Corporation’s leather and SVA Organics’ organic products to 18 global markets in over 200 countries, increasing the demand for their products and company size by as much as 300 times. In over two years, as of the first quarter of 2021, Amazon exported such Made in India goods worth $2 billion. By the virtue of this initiative, GI products will witness an unprecedented outreach.
Geographical indications are generally used for agricultural commodities and handicrafts and the government is working on ways to have more products GI tagged to appraise their value in exports. Recent data released by the commerce ministry indicates that India's exports rose 48.34% to US$ 32.5 billion from May 2020 to June 2021 because of healthy growth in shipments of petroleum products, gems, jewellery and chemicals. This was a straight seven month recorded growth. Exports stood at US$ 22 billion in June 2020 and US$ 25 billion for June 2019.
The Indian government, recognizing the global value of GIs through Agricultural and Processed Food Export Development Authority (APEDA) has been facilitating trial shipments across the globe for a variety of GIs including but not limited Kala Namak rice, Naga Mircha, Assam Kaji Nemu, Bangalore Rose Onion, Nagpur Oranges, GI varieties of Mangoes, GI-tagged Shahi Litchi, Bhalia wheat, Madurai Malli, BardhamanMihidana and Sitabhog, Dahanu Gholvad Sapota, Jalgaon Banana, Vazhakulam Pineapple, Marayoor Jaggery, etc. The government’s endeavour is to connect farmer organisations in India with global exporters, specifically for GI tagged agricultural goods. These initiatives by the centre are a testimony to the significance of GIs in augmenting the economy of a nation, along with the creation of global reputation.
For any questions, please contact the author, Ms. Ankita Sabharwal, Associate, at firstname.lastname@example.org.