16

CHAPTER – I

INTRODUCTION

1:1 Introduction

Socio-economic conditions vastly differ across the world. Globalisation

has become the buzzword on the lips of businessmen, politicians, religious leaders,

educators, students, the rich and the poor. It involves every aspects of life -

economic, political, social, cultural and religion. In the words of Huns Kung,

“Economic globalisation is the composite of Free World Trade, Space Shrinking

Technology and Spread of Financial Markets.”1 Trade is the original and continuing

fundamental of economic globalisation.2 Trade is a key mechanism for increasingly

moving goods and services around the globe. The primary function of World Trade

Organization(WTO) is trade liberalisation and expansion of free market all over the

world. For Amal Raj, “Liberalisation of trade must be accompanied by a certain

control by the government so that free trade serves not only just to create private

profit but also public welfare.”3 The ongoing process of liberalisation fudged the

government policies and pushed them towards privatisation. Privatisation is inherent

in liberalisation. Globalisation has become inevitable.

India is a vast and densely populated country. The economy could achieve an

annual growth rate of 3.5 percentage upto 1970s. The current growth rate is around

eight percentage4. The economic reforms ought to be welcomed. But what to be

realized is that it must not worsen major problems such as poverty, unemployment

17

and regional imparities in development. In India, the prime sectors such as

agriculture and agro-based industries are facing serious problems as globalisation is

laying stress on competition, reduction in cost of production and promoting exports.

Hence it is necessary to study the Impact of Liberalisation, Privatisation and

Globalisation on Natural Rubber and Rubber-based Industries which offer livelihood

to many in India.

India is blessed with rich and diverse agro climatic profile. It has a great

potential in the production of horticulture and plantation crops. Plantation crops are

high valuable crops having great economic importance and providing huge

employment opportunity. Tea, Coffee and rubber are the main plantation crops in

India5. For each of this commodity the government has set up a Board under an Act

of Parliament like the Tea Board, Coffee Board and Rubber Board, which provides

all allied services to make the product of their respective commodities extremely

marketable. Rubber is a prominent plantation crop. Rubber industry is a composite of

rubber plantation and rubber-based industrial units.

1:1:1 Plantation

A plantation is a large tract of mainly mono-culture growing a species of

plant and having long gestation period. According to the Plantation Labour Act 1951,

the term plantation applies to any land used or intended to be used for growing tea,

coffee or rubber which admeasures five hectares or more and in which 15 or more

persons are employed. Plantations are economic entities connected historically with

certain crops and countries. The salient features distinguishing the plantations in

India are their structural concentrations and market orientation. The bulk production

of rubber (87 percentage) and coffee (60 percentage) come from the small holder

18

sector where as the tea nearly 80 percentage accounts for by the corporate sector6.

The growth in production of these commodities during the last 10 years has been

phenomenal due to increase in both area under the crops as well as productivity. Tea,

coffee and rubber crops generate nearly 15 percentage of total agricultural export

earnings although they occupy only about one percentage of the total cultivated area

in the country7. India has the highest rubber productivity in the world8.

1:1:2 Rubber Plantation

The term rubber plantation refers to all the individuals and organizations

engaged in the activities in connection with the cultivation of rubber, maintenance,

operation, harvesting, processing and marketing. Among the plantation crops, natural

rubber is classified as an industrial raw material by the WTO despite the fact that it is

purely an agricultural activity. Rubber plantation provides the principal raw material

required for manufacturing of variety of rubber products ranging from toy balloons

to tyres for giant earth moving equipments. In India commercial cultivation of rubber

was started in 1902 by European plants at Thattekad near Alwaye. The plantation

was popularly known as Periyar Syndicate9. Rubber plantation sector in India

employs nearly four lakh persons directly. It is noteworthy that good number of

women are employed in this sector. Rubber plantation also provides a variety of

ancillary products like honey, seed oil, seed cake and rubber wood. Being a tree crop,

it has tremendous potential for eco-restoration. The plantation sector consists of

estates and small holdings*. It is dominated by small holdings with an average size of

* As per the Amendment to the Rubber Act passed by the Parliament in November 2009,

plantations up to 10 ha and above are reckoned as estates and those below 10 ha as small holdings.

19

0.51 hectare and share ninety percentage of area and ninety percentage of production.

The estate sector with twenty hectares or more accounts for the remaining10. Rubber

cultivation in India is traditionally confined to Kerala State and Kanyakumari

District in Tamil Nadu. These traditional areas contribute 81 percentage of the total

area of 661980 hectares cultivated with the crop in 2008–09. Kanyakumari District

shares 98 percentage in the total area under rubber in Tamil Nadu.

1:1:3 Natural Rubber

Natural Rubber (NR) is the unique renewable resource of nature. Though

rubber has been found in the latex over 2000 species of plant, Hevea Brasiliensis is

the most important commercial source of natural rubber for reasons of high yield and

low impurities. It is commonly known as rubber tree. Natural rubber is a tough

material which possesses properties of plasticity, resistance to electricity,

adhesiveness and elasticity. NR constitutes the basic raw material for more than

50000 different articles for everyday use. This has made rubber industry the second

largest in the world next to iron and steel11. So NR plays an important role in the

industrial and economic development of the country.

1:1:4 Rubber Based Industries

There is inseparable relationship between rubber plantation sector and

rubber based industries in India. From a single item of proofed fabric produced in the

1920s, the rubber industry in India has progressed to make 35000 different products.

India realized the strategic importance of NR even before independence and hence it

was brought under Rubber Control and Protection Order in 194212. But the Indian

20

rubber industry was economically insignificant till independence. It has grown at a

phenomenal rate within the last six decades. The plantation sector is the main reason

for the high growth rate of Indian rubber manufacturing industries. . It provides

adequate raw material at an affordable price to manufacturers. The plantation sector

with the production of more than one million tonnes of rubber helps radical and rapid

growth for the Indian rubber based industries. NR has multifarious uses and there is

hardly any segment in modern life which does not make use of rubber based articles.

NR is an essential element for all forms of modern transportation. It plays a

significant role in manufacture of mechanical goods. It also plays vital role in

communications and transmissions. Moreover, it becomes indispensable in health care

and family planning. The new uses of rubber are emerging day by day. Thus NR has

become the base material for manufacturing an incredible variety of products. The

product making units are spread all over the world.

1:2 Statement of the Problem

Liberalisation of trade and financial markets and privatisation of public

sector gradually entered the agricultural sector. A number of policy changes such as

the removal of minimum export price on agricultural commodities, the reduction of

tariff barriers to facilitate agricultural exports and lowering of import duties are

notable. The Indian rubber industry plays a major role in the Indian economy. The

industry has certain distinct advantages like extensive plantation sector, indigenous

availability of basic raw material, a large domestic market, cheap labour, training

facility in various technical institutions, on-going economic reforms and improved

living standard of the masses. The Indian economy is undergoing tremendous

changes with Liberalisation, Privatisation and Globalisation policies initiated in

21

1991. Natural rubber is also subjected to various reforms under the new policies of

Structural Adjustment Programmes. India stands third in the world production of

NR. It has become the second largest natural rubber consumer next to China. It has

recorded a consumption growth rate of 6.8 percentage in 2009-1013. In the era of

globalization, possibility of increased trade in the global rubber market has widened.

According to Zygmunt, “Globalisation has given more opportunities for the

extremely wealthy to make money more quickly. These individuals have utilized the

latest technology to move large sums of money around the globe extremely quickly.

Unfortunately it makes nothing to the lives of the poor.”14 The present study is

aimed at evaluating the impact of L.P.G� on natural rubber and rubber based

industries in Kanyakumari District.

Kanyakumari District in Tamil Nadu accounts for 98 percentage of

production of rubber in the State. A large quantum of people depends on this industry

for their existence. So there is a greater need for the sustenance of the rubber sector

both in the forms of rubber plantation and rubber based industries in Kanyakumari

district which covers a geographical area of 167200 hectares. The best quality latex is

produced in Kazhiyal and Kulasekharam rubber plantations in Kanyakumari district15.

Out of 91807 hectares of total crop area, rubber is cultivated in 19500 hectares.

Nearly 24000 tonnes of natural rubber is produced per annum. There are 16 rubber

estates with an area of more than 20 hectares 24 rubber estates with an area of 10 to

20 hectares and growing rubber in 6011 hectares and about 30250 small holdings in

13489 hectares.16 Arasu Rubber Corporation cultivates rubber in 4280 hectares17.

� LPG- Liberalisation, Privatisation and Globalisation

22

There are thirty five Rubber Producers Societies in Kanyakumari district. They give

training to the members, conduct seminars, supply planting materials and provide

technical advices. The Rubber Board provides loans and subsidies to the growers

through these RPS. There are fifteen Self-Help-Groups engaged in rubber honey

production and rubber nurseries. Moreover there are 250 registered rubber dealers in

the district18. Thus the district has all the factors favoring rubber plantation. The

value of rubber latex can be enhanced by manufacturing rubber products. In

Kanyakumari district there were 126 small scale rubber-based industries registered

under the District Industries Centre (DIC) with a capital of Rs.437 lakh. They

manufactured rubber products like gloves, rubber balloons, rubber bands, rubber

sheets and mats. They provided employment to 1874 people19. But most of them have

downed their shutters. At present there are only seven manufacturing units. Although

the district has the potential for establishing more and more rubber based industries, it

is obvious that the resources are not tapped efficiently and economically especially

by the tiny units in the age of globalisation. So there is a need to study further. This

study aims at evaluating the impact of Liberalisation, Privatisation and Globalization

(LPG) on natural rubber and rubber-based industries in Kanyakumari district, in order

to seize the new views and avenues opened all over the world through the

globalisation process.

1:3 Objectives of the Study

Indian rubber industry is in a transition period due to the economic reforms

initiated by the Government headed by Shri.P.V.Narasimgha Rao at the Center in

23

1991. The impact of LPG may be adverse or favorable on all fronts of rubber

industry from production to consumption. The object of this study is to throw light

on these impacts, so that a long-term strategy for NR can be formulated. Following

are the objectives of the study

1) To know the liberalisation measures taken by the Indian Government with

regard to NR.

2) To study the supply and demand position of NR in the pre and post-

liberalisation period.

3) To know the impact of globalisation on the price of NR.

4) To analyze the impact of LPG on rubber plantations and rubber based

industries in Kanyakumari district.

1:4 Hypotheses of the study

Following hypotheses have been formulated for the study.

1) Supply side of Natural Rubber (NR) is dominated by small holders and

demand side is dominated by large manufactures.

2) There is no difference between the growth rate of natural rubber

consumption during the pre and post-liberalisation period.

3) Domestic and International prices are highly positively correlated during the

post liberalization period.

4) Increase in rubber production is the basis of rubber based industries in

Kanyakumari District.

5) Rubber cultivation moves into the area of other crops in Kanyakumari

district.

24

1:5 Literature Review

With a view to know what had been done and what is yet to be explored in

the field of Natural Rubber a number of studies have been referred. For a bird’s–eye

view some are given here under four headings.

1) Rubber and Rubber Plantations

2) Rubber-based Industries

3) Problems in and around Rubber Plantation and Rubber-based Industries

4) NR in the global business environment.

1:5:1 Studies Related to Rubber and Rubber Plantations

Loren, G. (1962), in his book titled ‘Rubber’ has mentioned that though

rubber has been obtained from thousands of plants, Hevea is the preferred and viable

one because hevea latex has high molecular weight and low non-rubber materials20.

George, M.V. (1965), has made a study on the relative changes in acreage

under different crops namely rubber, paddy, sugarcane, coconut, cashew and tapioca

from1952-62 in Kerala. He has observed that the maximum growth in the acreage was

towards rubber followed by sugarcane and cashew and the lowest rate was for tapioca.

He has concluded that the cropping pattern in Kerala has undergone a slight shift from

food crops to cash crops21.

Jose Thomas (1979) in his study on “The Economics of Rubber Plantation

Industry in Kerala”, evaluated the role of the Rubber Board in the development of the

rubber-plantation industry in Kerala. He reviewed the various schemes of the Board to

increase the rubber-based industries. He also assessed the benefits derived by the

rubber cultivators in Kerala from the new-subsidy scheme introduced by the Board22.

25

Elsamma (1981) in her study on “The Economics of Rubber Cultivation by

Small Holders in Kottayam District” estimated the cost of production as Rs.305 per

quintal sheet rubber. She also reported that the pay-back period of rubber cultivation

as 9.51 years. According to her it was profitable for small holders23.

Dato, Y.B. (1983), presented a research paper in the Planters Conference

held in RRIM and stressed the need for mechanization of rubber plantation to cope up

with the growing labour shortage. He recommended to develop a tool which should be

as light as a tapping knife and be able to tap a tree in less than two seconds the time

required for the conventional manual tapping24.

Uma Devi (1984) in her doctoral thesis titled, “The Impact of Plantation

Crops on Kerala’s Economy” analysed the various aspects of plantation crops such as

area, production, productivity, price, import, export and employment generation

during the pre and post independence periods. She identified that tapping decision

was significantly influenced by the price output while planting decision was

negatively related to price. She concluded that expansion of plantation ought to be

accompanied by decline in area under forest and in the domestic production in another

source of food25.

Ajith Kumar et.al. (1994), analysed the growth performance of the rubber

plantation industry in Kerala. They stated that the growth rate of tappable area,

production and productivity were positive and significant during 1955-1992. They

concluded their report by stating that as there was only limited scope for extension of

cultivation in Kerala further development depends on an increase in productivity26.

Peter Mathew (1996) examined the relationship of scientific literacy of small

holders with their training and education. The study revealed that the extent of

26

scientific literacy among small holders was inadequate. He concluded his study by

stating that the formal education along with different types of training would enhance

the scientific literacy and in turn would improve the cultural practices of rubber for

the maximum yield from their small holdings27.

Sethuraj, M.R. (1998), in his study on “The Productivity Improvement in

Rubber” stated that continuous cultivation of rubber for the past several decades had

not deteriorated the productivity of the land. Instead scientific cultivation of the crop

resulted in an increase in the yield without sacrificing the long term productivity of

the soil28.

Rajasekharan and Krishnamoorthy (1999) had indentified the determinants

of technical efficiency in NR production in the estate sector of Kerala. According to

them, technical efficiency was associated with the role of management in the

production process. They were of the view that the differences in the efficiency of

factor use were attributable to differences in the entrepreneurial talents of the firms.

They identified that the supervisor- tapper ratio, farm size and the managers training

were the sources of variation in technical efficiencies. They have concluded that

except farm size the other two were significant factors and the management functions

such as organization of the work, motivation, training and supervision of employees

were important to achieve the frontier level of output from the rubber estates29.

Mathew, N.M. (2002), in his study on “Natural Rubber Research in India,

Yesterday, Today and Tomorrow,” mentioned that the rubber plantation industry had

an inward orientation as there was adequate demand from the domestic manufacturing

industry and a protective market environment. He opined that with globalisation of

trade and entry of new competitors, consolidation of the position of Indian rubber in

27

the internal market and aiming at competition in the world market emerged as the

most important challenges. He suggested to face them by ensuring cost and qualitative

competitiveness30.

Sekhar, B.C. (2004), in his article justified the use of the name Kamadenu

for the rubber tree for the reason that it was the provider of rubber, tropical hardwood,

pharmaceuticals, chemicals and desirable materials for human sustenance and

comfort31.

Vijayakumar, et.al. (2005), conducted studies in various parts of India with

different agro-climatic patterns. Since non-availability of sufficient tappers and cost

of tapping accounted for seventy percentage of the expenditure in NR production,

they recommended low frequency tapping systems to achieve the full yield

potential32.

Vibin, V. (2005), in his article about “Natural Rubber Average Yield May

Touch Record High”, highlighted that the main reason for the spurt in productivity

was the prevailing high price for NR, which induced farmers to provide better

fertilization and care to trees33.

Sajen Peter (2008) has mentioned in his article titled,” Rubber Industry

and its Bright Prospects”’ the need for trained tappers in order to maintain the lead

position in rubber yield over the world. He has pointed out that inefficient tappers

could bring down yield even upto fifty percentage34.

Paramasivan, T. (2008), in his study on, “Production and Marketing of

Rubber”, had pointed out that in rubber plantation the bottom level workers who

involved in tilling, grooming, manuaring and tapping were low paid while the

plantation owners were drawing high profit. He asked the workers to form unions to

28

come out of the exploitation. He requested the government to cover the plantation

workers too by the Tamil Nadu Government policy of giving land to the landless35.

Cyril Kanmony and Gnana Elplinston (2010) analysed the impact of

climate change on important crops in Kanyakumari district. They have reported that

the climate conditions particularly the rainfall pattern of any country affect the area

under cultivation, production and productivity of important crops like paddy, wheat,

sugarcane and rubber. So the conversion of agricultural land into non-agricultural land

has been going on in a great speed. They have suggested the district authorities to take

suitable action not only to mitigate adverse impact of climate change but also

conversion of agricultural land into non-agricultural land36.

Sivaniah, A., in his attempt to identify the factors affecting NR production

and productivity in the district has revealed that rainfall is the major factor. He has

suggested to use raingurads to increase production by 11 percentage, as nearly twenty

seven tapping days are affected per year due to rain37.

Sheela Thomas, Chairman, Rubber Board, in her report to Indian Rubber

Journal has briefed that the rubber plantation industry in India has recorded

spectacular achievements during the six decades since 1950-51. NR production

provides livelihood to million people. There has been nearly a seven-fold expansion

in area and four-fold increase in average yield. As a result, the total production has

surged from a mere 1530 tonnes to 855000 tonnes in 2011. During the last three years

the growth rate in production has been 6 percentage per annum. as against the global

average of 3.3 percentage. In yield per hectare, India has emerged as the highest

performer among the major rubber producers. The high yield has served considerably

in imparting cost competitiveness to Indian rubber38.

29

1:5:2 Studies related to rubber-based industries

Loren,G (1962), in his book ‘Rubber’ has written that many uses of rubber

are made daily around home in electrical fixtures and appliances, plumbing fixtures

and appliances and cleaning equipments and children’s amusements. He has

mentioned that in many cases, the choice of rubber or other material is determined

entirely on the basis of cost but in some cases rubber contributes to operating comfort

and in others particularly if non-conductivity of electivity is necessary rubber is

essential. Personal use of rubber, in the form of boots, shoes, raincoats, is its oldest

application. While the use of rubber in transportation has now far out- distanced all

other applications39.

Raju (1990) analysed the development and problems of the rubber based

industries in Kerala and suggested two steps to increase productivity namely

reorientation of tax structure to reduce tax burden and to stabilize the prices of basic

inputs to produce rubber goods at competitive prices40.

Baker, C. (1998), has mentioned in his article titled “Natural Rubber from

Wickham to 21st Century”, that the use of rubber accelerated after the discovery of the

pneumatic tyre. The 1940 s, 50s and 60s saw a whole series of innovations with NR in

terms of new uses. A prime example is rubber on roads. Accordingly, there was the

development of rubber-metal laminated bearing for the protection of whole buildings

against ground borne vibration in 1965. In the 1970s Expodised Natural Rubber and

Thermoplastic Natural Rubber were developed which could be recycled five times

without significant loss of properties. In the mid 1980s the rubber-metal laminated

bearing was developed to protect buildings from earth quakes by damping out the

seismic vibration. He had viewed that the prospects for the NR industry were very

30

promising as space shuttles to use NR in their tyres. So generations to come in 21st

century would still need this unique polymer41.

Paul Vinaya Lal Wilson (1999), studied the performance and problems of

the rubber-based industries in Kanyakumari district. He identified that most of the

entrepreneurs who had started rubber-based industries in the district had no exposure

to rubber product manufacturing technology. He recommended the government to set

up rubber techno-park in the district for the development of rubber-based industries42.

Abraham, P.O., (2001) in his doctoral thesis tilted, “Problems and

Prospects of Rubber-based Industries in Kerala”, confirmed that the backwardness in

the development of rubber-based industries in Kerala were attributed to concentration

of rubber goods production in a few items, lack of enterprising entrepreneurs, non-

availability of sufficient power, labour problem, difficulties in arranging finance, non-

cooperative attitude of the government officials, etc. He concluded his study with a

note that the rubber-based industrial activities had a bright future in the state, provided

a favourable industrial climate was created and maintained by the government,

financial institutions and the industrialists43.

Smit, H.P. (2005), analysed the NR price trend and came to the view that

rubber consumption was more in tyre sector when compared with the non-tyre sector.

Tyres of commercial vehicle had a major role in the demand of rubber44.

Gorden Cook, J. (2005), in his book “Rubber” has mentioned that rubber

from the plantation, in the form of sheet or liquid latex, is the raw material for

producing more than 60000 different articles and the number is increasing steadily as

new applications are discovered from it. But despite this immense range of rubber

products, the prosperity of the rubber industry is linked directly with that of the

31

motor-car industry because it alone consume more than two-thirds of the annual

output of rubber45.

1.5.3 Studies related to problems in and around rubber plantations and rubber-

based industries

Jacob George (1985), evaluated the performance of Co-operatives in the

field of natural rubber marketing. He reported that co-operative rubber marketing

societies had been confronted with the problems such as over politicalisation, less

accountability, lack of professionalism, competition from dealers and visual grading.

He suggested remedies such as professional orientation and professional

representation among the Board of Directors of Co-operative Societies, strengthening

the Apex Body and restriction of membership for better performance of the

societies.46

Manoharan Nair.K. (1990), in his research work on Problems and

Prospects of Plantation Industries in Kerala identified the problems in the cultivation

of rubber, marketing of rubber products and the management of plantation industry in

Kerala. He suggested modernization as the major solution for problems associated

with cultivation and marketing of rubber products.47

Knox. G and Theison. A. A. (1991), have made a study on the feasibility

of introducing new crops. According to them natural rubber has been facing many

technical and economic barriers towards commercial development. They have

suggested technical refinement to reduce the cost of production of NR to a level that

would be economically attractive. 48

Varghese (1991), in his report on, “Marketing of Raw Rubber in India” has

analysed the marketing system in rubber industry. He has mentioned that in the midst

32

of adverse conditions the favorable aspect is the well spread network of dealers in

villages to procure natural rubber. 49

Colin Barlow, et.al. (1994), examined the key aspects of rubber

consumption. According to them the vital aspect of demand for rubber is derived one,

as elastomers are intermediate goods used in producing final consumer goods. Thus

demand for rubber in general, depends on many factors influencing demand for final

goods. So the rubber demand situation is more complex than that of rubber supply.50

Kuriakose (1995) conducted a study on the marketing channels of NR and

reported that the co-operative sector handled only less than 20 percentage of the

rubber traded in the Indian rubber market. He concluded his study by stating that

Government and Rubber Board should take special efforts to strengthen the co-

operative marketing in order to minimize the problems of rubber growers such as lack

of grading, shortage of storage facilities, indebtedness and delay in payment. 51

Lakshmi (1996) analyzed the NR price movement for a period of twenty

six years. She opined that among the different variables like production, consumption,

stock, import and international price, production of NR was the most significant

variable that influenced the price of NR in India. 52

Sundar, P.S. (1999), in his article, “ How to Achieve Stability in Prices?”

has stressed that the stability in prices does not mean a fixed price for a given period

of time. For him, it means that the demand factor would be stable to match the supply

side of the rubber economy. When the supply increases, there will be a number of

factors working to the advantage of the market to push up the demand, be it at home

or abroad. While the Indian rubber goods manufacturers can have an access to the

Indian or the global rubber market, the Indian rubber producers should have an equal

33

access to sell their rubber in India or abroad. So, a stable price mechanism does not

injure an open policy or globalization, but uses the globalisation factor as a weapon to

ease the pressure of glut. 53

Cashin, et.al., in their report on, “ Task Force on Plantation Sector” have

assessed that the volatility of commodity prices prevents plantations from meeting

their debt re-payment obligations even during the phase when the physical

productivity of their holdings reaches economic levels of yield. For them as the

plantation commodities undergo cycle of booms and basts the price shock lasts for a

period of six to seven years in case of coffee, seven to twenty one months in case of

tea and more than eighteen months in case of rubber.54

Viswanathan and Raja Sekaran (2001), in their analytical report on

“Decline in NR Prices and Adoption of Agro-Management Practices in Small

Holdings in India”, brought out that the period since mid-90s was unique in the case

of NR in India as it experienced severe crisis characterized by sharp increase in NR

price during 1995-96 followed by a steep decline thereafter. The crisis in NR price

posed severe constraints on the viability and sustenance of rubber cultivation as well

as adverse effects on the adoption of improved agro-management practices by the

small growers in India. They identified low cultural practices and stagnancy in

tapping wages as the immediate responses for the small rubber growers in Kerala for

the decline in rubber prices55.

Gurder Singh and Ashokan (2001), in their study on, “ Competitiveness of

Indian Rubber Under WTO has stated that as costs incurred and return realized are

spread over the economic life of the plantation. Their simple summation and annual

34

averages would not reflect the real values. So time value of money has to be used to

compute the present value and annuity of inputs and outputs. 56

Sundar, P.S. (2005), made a market outlook for 2005 and reported that

there was a sign for increase in demand particularly beyond 2005. For him the

increasing pace of industrialization and the tight supply of rubber for the major

players such as India, China, Malaysia and Thailand were the two factors responsible

for the increase in demand. He concluded that the global output would increase by

seven percentage in 2005 as against 11.7 percentage in the previous year. 57

Tiyo (2007) analyzed the impact of Futures Trade in rubber on the price

spiral. He believed that Futures Trade had a role in generating wide fluctuations in the

cash market of rubber in India. In support of his belief he quoted that in March 2003,

the month in which NR futures was commenced in India, the price of Ribbed Smoked

Sheet was Rs. 42.75 per kg it then increased to Rs.55 in October and to Rs.116 in

May 2006. 58

Budiman (2009) in his report on “ Recent Developments in NR Prices”

pointed out that the demand for elastomers both for SR and NR was well secured and

had been continuously increasing at a rate of three to four percentage per year, in line

with improvement in living standards around the world. 59

Sajeena, H. (2010), in her study on, “ Production and Marketing of Rubber

in Kanyakumari district”, revealed that the major factors affecting the viability of

rubber producers were steadily increasing in the cost of production, the instability of

price and the shortage of skilled labour. She was of the view that as the production

sector was dominated by small holdings, a group approach in an organized form

would be a proper strategy to maximize return.60

35

Kaushik Roy (2010) in his interview with Rubber Asia has responded that

the impact of higher level NR prices has reduced the profit margin of tyre and other

rubber consuming industries. He has the view that as it is difficult to predict the

continuity of the NR price at a higher level, it is necessary to invest in fresh crop,

increase acreage under cultivation, replace older crops with new ones and to find

ways and means of replacing NR usage in tyres and allied items with synthetic

rubber.61

James Jacob (2011), Director of Rubber Research Institute of India, reported

that climate change had its impact on NR supply and price fluctuation. He had opined

that the world NR production was adversely affected by extreme and unusual weather

conditions in the years 2005, 2007, 2009 and 2010.62

1:5:4 Studies Related to NR in the Global Business Environment

Sharma and Saxona (1998), studied the impact of international trade and

various factors of growth in India and revealed that liberalisation of trade made

positive and significant effect on the growth of output of various sectors. They

concluded their study by stating that the contribution of import substitution and

technological change for growth of output was positive after trade liberalization and it

was negative prior to liberalisation. 63

Kuttaiah (1999), in his analysis on the overall development of the Indian

rubber industry since independence was of the opinion that Export Import Policies

during liberalisation period had adversely affected the growth of the industry. His

finding was that the import and domestic price for NR were closely related. 64

Kulkarni (1999), analyzed the challenges and opportunities of Indian

rubber industry in the wake of liberalisation and globalisation. He was of the opinion

36

that rubber industry in India had a prolific growth rate with the support of easy access

to raw materials, rapidly expanding international market, adequate government

support and technically qualified and experienced man power. 65

Jesu Rajam, S. (2001), in her study on “Rubber Industry in Kanyakumari

District” has mentioned that if liberalisation, economic changes and removal of

licensing system have brought a hope for better opportunities, they have posed a

challenge to the rubber industry to stand up to the international competition to

survive.66

John (2002) in his study on, “ The impact of Economic Liberalization and

Globalisation on the Marketing of NR in India” has pointed out the protective

environment of NR sector was transformed into a new protection-free liberalized NR

economy. For him it was indispensable to meet the challenges of liberalisation and

globalisation and to explore the new marketing opportunity opened in a liberalised

world. 67

Desalphine, S.M. (2005), the Chairman of the Rubber Board of India

perceived the WTO as a challenge and an opportunity. His special mention was that

there was a wide spread fear that there would be large-scale import of NR into the

country due to the removal of Quantity Restriction on import of NR in April 2001.

But since export of NR was adopted as a strategy to guard against the possibility, the

export of India was more than the import. India exported 75905 tonnes while only

44199 tonnes were imported during 2003-04. According to him, the market access

provided by the WTO was an opportunity for India to explore the international

market. 68

37

Sekhar, B.C. (2005), in his article titled, “ How Asia can take on the

West?” has mentioned that the driver in the globalisation process would inevitably be

the private sector corporations and their singular persuit is profit. The corporations are

sustained by innovative science and technology. What they obviously lack is a socio-

economic conscience. The conscience must be manifested in appropriating 20 to 25

percentage, of their profit for the benefit of the workforce which maintain high

standards of productivity, quality, morality and loyalty. By providing incentives in the

form of financing for housing, pension during retirement and an insured life, the

Asian worker productivity can match or even exceed that of the West. He has stressed

that without such increase in productivity, competition from the industrialized

countries can not be faced. 69

Sunny Varghese & Jayaprakash (2006), analyzed the Tenth Plan schemes

for rubber plantation development and reported that the development schemes of the

Rubber Board have played a crucial role in the expansion and modernization of

rubber plantation in India. The schemes were designed to provide financial and

technical assistance to growers. They had also pointed out that NR production in the

country had been inward oriented and catering to the demand of the domestic

industry. They suggested that in an era of liberalised economy and an emerging global

market, the NR production sector should aim at exporting NR to the major consuming

countries. The government’s schemes could be for increasing productivity besides

bringing in a significant improvement in quality in order to make the small holdings

globally competitive. 70

Jomo, K.S. (2008), in his article on ‘Economic & Political Weekly’ raised

a question which went like this Trade liberalization for Development? Who Gains?

38

Who Loses? For him trade liberalisation caused unemployment or reduced income in

previously protected or internationally uncompetitive activities. 71

Mohan Kumar, S. (2008), in his article titled “Branding and Logo for

Indian NR”, has mentioned that Indian natural rubber was marketed as an unbranded

product, in which the scope of differentiation with the competitors market offerings

was lesser. But in recent years, the international business environment influenced the

domestic NR sector and the industry started to grab the export market. To protect

India as one among the global leaders in quality NR producers and suppliers, the

Rubber Board introduced Indian rubber logo trade mark of ‘quality assured’. The logo

stabilized quality assurance, enhanced the image and highlighted the attributes of

rubber as a quality product. 72

Sajen Peter (2008), in his report on “ Rubber Industry and its Bright

Prospects”, has stated that the domestic and international demand for rubber has been

increasing. Nearly fifty percentage of the domestic NR production is consumed by

automobile industry. He has stressed that though in the near future, the entire

production will be consumed internally, it is necessary to ensure that atleast ten

percentage of the production has to be exported for tactical and exposure advantage in

the globalised era. 73

Joseph and Nagi Reddy (2009), have analyzed the Foreign Direct

Investment Spillovers and Export Performance of Indian Manufacturing Firms after

Liberalisation and has reported that the extent of globalisation of a country’s

economy is usually evaluated from its trade relations with the rest of the world. They

have suggested that an exporter requires to have knowledge about the foreign market

conditions to be successful in the overseas .74

39

Smitha (2009), in her study on ‘Multi National Companies Impact on

India’, has mentioned that the process of liberalisation and globalisation has opened

the markets up to global competitions. Her point is that competition has become acute

with the entry of new players. So the business approach has to be shifted from

product-centric to customer centric.75

Vijaya Malik (2010), the Director of Bureau for Indian Standards has

said that India has formulated 236 Indian standards on rubber and rubber products and

is in the process of aligning them with respective International Standards. He has also

forecasted the growing acceptability for Indian rubber and rubber products in the

international market. 76

Binoi K. Kurian (2011), in his article on Indian Natural Rubber Brand-The

Quality Icon has stated that India’s pressure in global rubber market is rather recent.

The total global market size of NR is 10.97 million tonnes, where as the country

produces less than 10 percentage of the total global demand. Still it is managed to

export 0.5 million tones NR and remains a potential destination for global importers.

To differentiate the quality of NR exported from India and to acclaim its unique

selling propositions, a brand for export has been unveiled by the Rubber Board. For

him ‘Indian Natural Rubber’ brand is having a forerunner advantage as no other

producing country has attempted to market rubber in their brand. 77

Narasimha Sarma (2011), Registar, Acharya Nagarjuna University has

reported in the National Seminar on Impact of Globalisation and Rural Development

that globalisation has become inevitable. It should be used as a means to achieve our

Plan objectives. He has also opined that in the globalisation context, India has to

40

concentrate on education and training labour force and modernization of industry with

a view to enhance productivity. 78

Satya Sundaram (2011), mentioned in his paper in the ‘National Seminar

on Globalisation and Rural Development’ that in the past Indian economy had

become a victim of too much State interference and controls. The economic policies

followed so far had not been able to reduce rural and urban disparities. He had also

stressed that in the Indian context, reducing regional disparities in development and

bridging the gap between rural and urban areas in respect of living standards were

very important. He suggested the government to take up the responsibility of

enhancing infrastructural facilities in rural areas. 79

1:6 Methodology

The methodology adopted for the study is descriptive cum analytical.

1:6:1 Database

The study is based on both primary as well as secondary data. Secondary

data has been gathered from published sources like Indian Rubber Statistics, Rubber

Growers Guide, Rubber Board Bulletin, Planters’ Chronicles, Rubber Asia, Asian

Rubber Handbook and Directory and Rubber News parliamentary Digest. Moreover,

data published in Journals, Books and Newspaper have also been used. Statistical

reports about area of cultivation, production, productivity, consumption, import,

export and price are collected for a period of 40 years from 1970-2010. Data and

information has also been collected from websites. Primary data has been collected

from rubber growers and officials of the Rubber Board.

1:6:2 Sampling

41

The field enquiry was conducted between September and December 2010.

The survey covered three taluks namely Vilavancode, Kalkulam and Thovalai in

Kanyakumari district. A stratified random sampling was used to draw samples for the

survey. Householders with large holdings of more then 20 hectares are excluded due

to their thinness.

Table 1.1

Sample Size

Sl.No Taluks Holdings Sample Size

1

2

3

Vilavancode

Kalkulam

Thovalai

16638

10587

3025

165

105

30

Total 30250 300

1:6:3 Analysis of Data

The data collected for the study has been analysed with the help of

statistical techniques such as mean, correlation, trend, T-test, NPC and SWOT

Analysis.

1:7 Limitations

The bias of the respondents while collecting primary data has been tried by

the researcher, by testing and asking indirect questions. However, the researcher

cannot rule out the possibility of bias completely. The secondary data has been used

as such, without cross examination. Thus, the possible adversities if any existing

cannot be ruled out.

42

1:8 Scope for Further Studies

The researcher has identified the following areas for further studies for the

development of NR sector

1. Movement of NR price before and after globalisation in India.

2. Challenges before rubber plantations and rubber-based industries under

globalisation in India.

3. Role of Rubber Board to maintain the lead position in NR productivity in the

globalisation era.

4. Value addition in NR- A comparative study in the States of Kerala and Tamil

Nadu.

1.9 Chapter Scheme

Chapter I. presents a brief picture of statement of the problem, objectives,

methodology, limitation, scope for further studies and reviews of previous

studies in this regard.

Chapter II is devoted for liberalisation measures initiated in the Indian rubber market.

Chapter III presents descriptive and analytical evidences on the impact of

liberalisation measures on the supply side of NR.

Chapter IV highlights the impact of liberalisation and globalisation on the demand

side of NR.

Chapter V analyzes the impact of globalisation on the price of NR.

Chapter VI explores the feasibility of rubber plantations and rubber-based industries

in Kanyakumari district in the globalisation era.

Chapter VII summarizes the findings and suggestions

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