India is one of the world’s largest producers and processors of cashew nuts. However, over the past decade, India’s cashew exports have declined significantly from 43% to 8%. This decline has hit India’s cashew industry hard.
India’s price competitiveness does not come close to Vietnam’s price competitiveness in the export market. Vietnam has surpassed India in cashew exports and captured India’s share of the export market. The country has made systematic efforts over the past two decades to strengthen its cashew nut industry, which is now a world leader.
Currently, the real competitor for India’s cashew nut industry is Vietnam. The Indian cashew industry needs to adopt some of the best practices of the Vietnamese industry to improve its performance. This is particularly important as the state of Maharashtra is one of the leading producers of cashew nuts in the country. The Maharashtra State Transformation Institute (State NITI) has collaborated with the Maharashtra Cashew Board with support from the Maharashtra Cashew Processors Association to understand Vietnam’s success in cashew production, processing systems and export growth. A delegation was sent to
The delegation led by the author included stakeholders from Maharashtra, exporters, processors and farmers. The visit provided valuable insights into increasing productivity, improving processing infrastructure, enhancing value-added products, financing mechanisms, and export strategies. MITRA seeks to introduce best practices from Vietnam’s cashew nut industry to the cashew nut industry in Maharashtra to improve cashew exports and explore new markets.
discovery and observation
1. Economies of scale through automation: Vietnam has gained economies of scale in cashew nut processing by introducing high-end automation technology and large-scale processing. In contrast, cashew nut processing facilities in Maharashtra are small and shed-like in nature and cannot take advantage of economies of scale. The largest cashew processing plant in Maharashtra has a capacity of 20 tonnes per day, while in Vietnam it is over 200 tonnes per day.
2. Decrease in labor intensity: Vietnam’s highly mechanized processing system operates with far fewer employees. For example, a 20 tonne capacity unit requires only 40 employees in Vietnam compared to 300 employees in India, resulting in significant labor cost savings.
3. Availability of high-tech gear: Vietnam is considered one of the world’s best manufacturers of high-quality cashew processing machinery, which is easily available. However, India does not have state-of-the-art cashew nut machinery produced locally and has to be imported from Vietnam, which increases costs.
4. Reduce transportation costs: Vietnam has a competitive advantage in export logistics as the cost of shipping from Vietnam to major markets such as the US is significantly lower than the cost of shipping from India.
5. competitive funding: Financing is more accessible and affordable in Vietnam as term loans for cashew nut production in Vietnam are available at interest rates of 4-5% with simplified documentation, compared to 9-10% in India. It’s the price.
6. Average grade of cashew nuts: Vietnam mainly exports mixed grade cashew nuts at average price, while India exports standard grade cashew nuts such as W180. This is expensive in the international market compared to Vietnam’s average grade.
7. value-added products: Currently, Vietnam is attracting great attention to cashew value-added products such as cashew butter. Vietnam and the US have established a value-added facility in the country through a joint venture.
Indian cashew industry strategy
1. Expand your farm to increase production: Increased cashew plantation area and high-tech agriculture will improve domestic production and reduce dependence on raw cashew imports.
2. Deploy automation and processes at scale: Promote the introduction of automation technology and encourage the installation of large-scale processing equipment in order to achieve economies of scale and improve efficiency.
3. Promoting affordable financing: Introduce long-term financing with lower interest rates and simplified documentation to support cashew processing factories and strengthen their competitiveness.
4. Focus on exporting to the Middle East: Strengthen trade relations and focus export efforts on the Middle East market, leveraging its high demand and proximity to reduce logistics costs.
5. Promote Indian cashew nut brands: Actively market Indian cashew nuts globally, highlighting their superior quality and taste and establishing a clear brand identity in the international market.
6. Providing tax support: Provide tax incentives and consulting to cashew processors to reduce financial burden and foster growth in the sector.
7. APEDA plan: The announcement of APEDA’s 40% subsidy for machinery for the cashew industry is a step in the right direction. This provides great incentives for entrepreneurs and manufacturers to invest in the latest technology and expand their operations. This system must be promoted effectively.
conclusion
Vietnam’s cashew nut industry shows exceptional export efficiency, with 95 percent of production destined for international markets and less than 5 percent for domestic consumption. However, the sector is facing challenges such as raw material shortages as some African countries have begun curbing processing and exports. The situation is further exacerbated by minimal domestic demand, with several cashew processing facilities in Vietnam closing in recent years.
As a result, Vietnam is gradually losing price competitiveness with India in the international market. India is one of the world’s top cashew consumers, with strong domestic demand, a vast raw material base, high-quality cashew nuts, and proximity to Middle Eastern markets, creating opportunities. States such as Maharashtra, which is the largest producer, have room for further development. Therefore, the role of the Cashew Board in the state is extremely important and the establishment of the Cashew Board by the Government of Maharashtra is a long-term strategic step.
The author is Senior Advisory Director, APEDA and Director, Maharashtra State Cashew Board.
