The Indian spice export industry, valued at $4.25 billion, is currently going through a tough phase, with Indian spices becoming a topic of discussion internationally. Reports have surfaced about adulteration and harmful elements present in Indian spices, causing concern in several countries. Let’s understand what exactly has happened and how it could impact the Indian spice industry.
What’s Happening?
Singapore and Hong Kong have banned some spices from renowned brands like MDH and Everest due to the presence of ethylene oxide (ETO) found during inspection, which could potentially cause diseases like cancer.
Moreover, the European Union has also identified similar harmful substances in spices imported from India, labelling nearly 60 types of spices and herbs as contaminated. Additionally, Reuters reported that the US Food and Drug Administration (FDA) and Australia are now scrutinising products from MDH and Everest.
Impact on Exports
According to IBEF, India is the largest exporter of spice products in the world. During FY24 (until February 2024), India exported spices worth $3.67 billion, whereas in FY23, the country exported spices worth $3.73 billion. From 2016-17 to 2022-23, India’s total export volume has grown at a CAGR of 5.85%, as depicted in the graph below.
These allegations could adversely affect India’s spice exports as several countries have imposed bans on Indian spices or implemented stringent inspection regulations, potentially impacting India’s spice exports.
Harmful Substances in Indian Spices: A Recurring Issue?
In 2014, biochemistry expert Dr Ipsita Mazumdar found lead in some popular spice brands sold in Kolkata, raising concerns about the potential risks of consuming these products. While FSSAI is responsible for ensuring the safety of food products, recently, they have increased the permissible limit of pesticides in spices and herbs by 10 times, raising further concerns.
In addition, according to The Hindu, the US FDA has barred Indian products from entering the country due to the presence of salmonella, a bacterium that causes salmonellosis, a foodborne illness. In the FDA’s Import Refusal Report for 2023, there are at least 30 instances where Indian products were denied entry for this reason.
India and WTO
India has raised a significant issue in the World Trade Organisation (WTO). India argues that in the absence of international standards, guidelines should be prepared to determine the maximum residue limit (MRL) for international trade. The maximum legally permissible pesticide residues found in traded products are referred to as MRL. It is the maximum level of pesticide residue that is legally tolerated in or on food or feed.
In its submission to the WTO, India has stated that strict MRLs can restrict trade and function as non-tariff barriers to international trade. This affects exporters from developing countries. The concern is that currently there are no uniform international standards regarding this matter.
Action by FSSAI
According to The Economic Times, after harmful chemicals were found in Indian spices, the Food Safety and Standards Authority of India (FSSAI) has taken strict measures.
Following the recent incident, FSSAI has ordered the inspection of all spice brands across the country. This step is not only essential for safeguarding the health of consumers but also crucial for maintaining the global reputation of Indian spices.
What’s in it for Investors?
Currently, this situation is a matter of concern for investors in the spice industry. Uncertainty prevails in the spice industry, which could affect investments. Although the most significant impact of this incident has been on MDH and Everest brands, which are not listed on the Indian stock exchange, other companies operating in the spice industry may also be affected.
What’s Next?
According to The Economic Times, the Economic think-tank Global Trade Research Initiative (GTRI) has warned that India’s nearly $700 million spice export is at risk due to the stringent regulations being implemented in several countries. The report also expresses concern that if the EU imposes similar bans, India’s additional $2.5 billion spice exports could be affected, posing a significant concern for the Indian spice industry.
That’s it for today. We hope you’ve found this article informative. Remember to spread the word among your friends. Until we meet again, stay curious!
*The companies mentioned in the article are for information purposes only. This is not investment advice.
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