Tea bud and leaves

Tea Leaves…Then Returns

May 7, 2012 • Developing Economies, Economic History, International Trade and Finance, Macroeconomic Measurement, Regulation, Uncategorized • 186 Views    No Comments

The Indian economy is slowing down. Maybe it’s all about the ease of doing business.

Ranked #132 out of 183 countries in the World Bank’s “Ease of Doing Business Index,” India has a lot of red tape. Just starting a business involves 12 bureaucratic tasks, each taking days to accomplish. To initiate construction, there are 34 procedures including 3 Tree Authority permits.

And yet still, although down from an 8% projection, the Indian economy has an estimated 6.9% growth rate for 2012.

Reminded by economist Tyler Cowen that we keep an eye on India and its trajectory toward becoming one of the world’s largest economies, I wanted to add to our posts on India (linked below) some tea information that really is about much more.

First, nationalism. Because tea was associated with the British colonial rule, leaders like Mahatma Gandhi urged their countrymen not to drink it. Now, just the opposite has happened. Inexpensive, consumed daily by all classes, and India’s second largest industry, tea might be named the national drink.

Next, the economy: With China first, India is the world’s second largest tea producer. A nation of tea drinkers, a lot of the crop remains at home. As a result, they are fourth on the world’s 2010 list of tea exporters but still, tea is a major source of foreign exchange. At the production level, with a labor force that is 50% female, the industry includes producers and their employees, retailers, distributors, exporters.

And finally, history: During the mid-19th century, hoping to diminish their dependence on Chinese tea, the British encouraged its development in India. Yes, the British East India Company was responsible.

Our Bottom Line: The world’s economic growth will increasingly depend on nations like India. And, keeping an eye on India involves the return of tea.

Here are the India section of the World Bank’s Ease of Doing Business Index and the Tyler Cowen column on India. And this article has all you ever wanted to know about the Indian tea industry. Finally, here is an interesting blog post from Scott Sumner about the future of the Indian economy.

At econlife, ranging from an identity program of eye and finger scans so people can prove who they are, to gasoline subsidies and the changing character of Indian queues, to India’s growing importance in the world economy, we have an interesting assortment of posts on India. In addition, our guest blogger, Ilya Sabnani gave us a first hand picture of Indian microfinance during her visit.

This post was minimally edited after it appeared.

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