The export performance was analyzed based on time-series data from 2011 to 2020 available at APEDA website. The first-order Markov chain analysis was used to study the trade directions of basmati rice export. A similar study was conducted by Mahadevaiah et al. (2005), Tejaswi et al. (2006), Satishkumar et al. (2016) and Yogesh and Srivastava (2020). The average export to a particular country was assumed as a random variable following the first-order Markov process. Ejt=(i=1 to r)∑Eit−1∗Pij+ejt

Where,

E_jt = Export of basmati rice from India during the year t to j^th country; E_it-1= Exports of basmati rice from India to i^th country during the period t-1; P_ij = Probability that exports shift from i^th country to j^th country; e_jt= The error term which is statistically independent of E_it-1, and r = Number of importing countries

The transitional probability P_ij, was then arranged in (c × r) matrix, having the following properties: 0≤Pij≤1ΣPij=1, for all i

The diagonal elements of the matrix measure the probability of the export share of a country being retained. Therefore, the examination of diagonal elements of .P.T.P. matrix indicates loyalty towards a particular country’s export of an importing country. The expected export share of a country during the period ‘t’ was obtained by multiplying the actual exports in the previous period (t–1) by the transitional probability matrix.

Exponential trend was selected as the best fit for both export quantity as well as export value of basmati rice from India (Fig. 1 and 2).

Exports of basmati rice from India (in quantity and value terms) show exponential growth during the study period. Growth was more prominent between 2007 to 2016. However, the foreign exchange earnings from the export of basmati rice show a sudden downfall between 2014 to 2017, after which it has recovered to the previous level. This was the result of a fall in international prices of Indian basmati rice. The export prices showed a positive correlation with the domestic prices, resulting from which farmers decreased the area under basmati rice cultivation during the upcoming years (Anonymous, 2019). This changed scenario led to an increase in prices during the financial year 2017-18, which helped recover the Indian basmati rice status in the international market.

The compound annual growth rate of basmati rice export in quantity and value terms was analyzed for the last three decades (Table 2). During Decade I, i.e. 1990-91 to 1999-2000, basmati rice recorded a positive and significant growth rate of 12.65 percent per annum in quantity terms and 12.02 percent per annum in value terms. The higher quality demand, comfortable production level of basmati and trade liberalization measures led further increase in the export of basmati rice from the country (Adhikari et al. 2016). During Decade II, the exported quantity of basmati rice experienced significant growth at 10.96 percent per annum due to increased competition whereas the export value reported 21.06 percent per annum significant growth rate due to better prices fetched by Indian Basmati rice in the international market. Consistent policies for the export of basmati rice and a hike in domestic production helped in making comfortable stock of basmati rice in the central pool for further export promotion (Gangwar and Rai, 1995 and Shende et al. 1998).

During Decade III, although it remained the principal exporting commodity and reported an increase in export in absolute terms the CAGR observed of exported basmati rice reduced both in quantity as well in value terms. The fall in CAGR during the third Decade was the result of a higher cost of production as well as marketing and high rate of various taxes imposed on rice exporters such as Purchase Tax on indirect exports, Market fees, Rural Development fund, Administrative charges, etc. which made Indian Basmati rice costlier than its competing nations like Pakistan, Thailand, Vietnam, etc. (Ramakrishna and Degaonkar, 2016).

Apart from above India also faced a downfall in exports to its most traditional market i.e., Iran. Recently, Iran declared itself as self-sufficient in basmati rice production. Secondly, there existed positive signs for an increase in Pakistan basmati rice demand by Iran (Report on Basmati Rice, APEDA, 2020).

In order to study the variation in the export trade of basmati rice of India, an attempt was made to analyze the instability in the export of basmati rice over the period 1990-91 to 2019-20 by splitting it into three decades. The instability during Decade II was observed to be highest (more than 30 percent) for quantity as well as the value of basmati rice export, followed by decade I and decade III, respectively (Table 3). The variability in quantum exported, varying demand, etc., might be the reasons for higher instability during decade II and I. Similarly, variability in quantum exported, devaluation of the Indian rupee, change in export policies, and volatile world prices in the global market might be the reasons for the variable export earnings from basmati rice (Adhikari et al. 2016 and Satishkumar et al. 2016). In the last decade (2011-2020), the exports of basmati rice have stabilized in exports and export earnings compared to previous decades. Therefore, it can be concluded that basmati rice was highly-priced sensitive because of which instability in terms of exported value (20.37 to 76.76 percent) was more as compared to exported quantity (16.95 to 37.58 percent).

Basmati rice is a traditionally exported agricultural commodity from India. Indian Basmati rice is known for its fragrant aroma, high quality, and nutrientrich properties (Paramasivan and Pasupathi, 2017). The major importers of Indian basmati rice were Iran, Saudi Arabia, Kuwait, Iran, United Kingdom, United States of America, United Arab Emirates, and Yemen (Table 4). More than 50 percent of the Indian basmati rice was exported to these countries only since 2011 (Adhikari et al. 2016 and Satishkumar et al. 2016).

During 2020, Iran accounted for 29.61 percent share in total basmati rice import from India, followed by Saudi Arabia (21.87 percent), U.A.E. (4.68 percent), Yemen (4.56 percent), Kuwait (4.42 percent), U.S.A. (3.33 percent), U.K. (2.60 percent) and other countries (28.90 percent). Iran has served as the primary buyer of Pusa 1121, a new notified variety of basmati rice, since 2008 due to its lowcost vis-à-vis of other basmati varieties (Sidhu et al. 2014). Along with Iran, Saudi Arabia also served as a significant export destination because rice is not produced in Saudi Arabia. Therefore, in order to meet the consumer demand country imported a substantial quantity of basmati from India. Also, the country did not impose any tariff on the imported quantity provided the product was not for further export (Adhikari et al. 2016). The long-term trading relations, high demand in the countries, and world export prices led to the consistent destinations of basmati rice export (Rangi and Sidhu, 2001; Bilal and Rizvi, 2013; Shailza et al. 2015 and Shailza et al. 2018). Similar results were observed in the analytical studies of Adhikari and Sekhon, 2014; Sidhu et al. 2014), and Satishkumar et al. 2016).

Trade directions of Indian basmati rice export were analyzed with the help of Markov chain analysis by using time series data from 2000-01 to 201920. Singh (2010), Bisht (2015), Satishkumar (2016), Bagalkoti (2019), and Yogesh and Srivastava (2020) had also employed Markov chain analysis to study the directions of trade for different agricultural commodities. Three transitional probability matrices (TP-I, II and III) were constructed for the year 2000-06, 2007-13, and 2014-20 and presented under Table 5, 6, and 7, respectively. The six major importer countries of Indian basmati rice were presented under TP-I, II, III, and the rest under other categories.

The elements presented in rows of transitional probability (T.P.) matrix provided information regarding probability of retention in a volume of trade and the extent of loss in trade on account of competitive nations. On the other hand, elements of the column represented the probability of gains in trade from other competing nations (Kusuma and Basavaraja, 2014).

On examination of Transitional probability matrix I (Table 5), it was observed that during the period 2000-2006, the highest retention capacity was 78.68 percent which signified that Yemen retained 78.68 percent of its previous year exports in the current year. Saudi Arabia served as the largest importer, but Yemen served as the most stable importer of Indian basmati during the year 2000-2006. Saudi Arabia has a retention probability of 0.5681, which implies that it retained a 57 percent share of its previous year’s exports in the current year. On the other hand, Saudi Arabia gained 86 percent of its share from the United Kingdom and 90 percent of its share from the United Arab Emirates. U.A.E. was observed to have 0.095 probability of retention. In contrast, the countries like Kuwait, United Kingdom, U.S.A. had zero probability of retention served to be the most unstable during the period 2000-06. The results are in line with the findings of Satishkumar et al. (2016).

Transitional probability matrix II (Table 6) for the period 2007-13 shows that Kuwait was having the highest probability (0.81) of retention, gaining 1.22 percent from U.A.E. and losing 8.36 percent and 9.60 percent of its share to U.S.A. and Saudi Arabia, respectively. Saudi Arabia was next in order retaining 73.97 percent of its previous year’s exports in the current year gained mainly from Kuwait (9.69 percent) and United Kingdom (64.15 percent). Further, it lost 26.02 percent of its previous year’s export to U.A.E. U.A.E. (59.14 percent) and Iran (33.70 percent) are also reported to be the stable importers of basmati rice from India. On the other hand, the United Kingdom and U.S.A. were observed to be the most unstable partners during 2007-13. The results are in corroboration with Adhikari and Sekhon (2014).

On perusal of Transitional probability matrix III (Table 7) for export of basmati rice from India during 2014-20, it was concluded that Iran (38 percent), Saudi Arabia (38 percent), and U.A.E. (24 percent) served as stable trading partners while Kuwait, U.K., and the U.S.A. were reported to be highly unstable importers of basmati rice.

Iran gained 43 percent of its share from countries pooled under other importer category and lost 32 percent of its previous year share to Saudi Arabia, whereas Saudi Arabia gained from U.A.E. (6.27 percent) and Iran (32.47 percent) and lost its previous year share to Kuwait (7.03 percent), U.K. (15.11 percent), U.S.A. (3.55 percent), U.A.E. (15.59 percent) and other importer countries (20.71 percent). Under TP-III also, U.K., U.S.A. along Kuwait reported being highly unstable importers of basmati rice from India.

On the basis of the transitional probability matrix obtained for the period 2014-20, the projected export quantities of basmati rice were worked out and presented in Table 8.

The projections showed that Saudi Arabia would likely to remain as leading importer of basmati rice from India. The other importers’ countries like Kuwait, U.K., U.S.A., U.A.E. and Iran would also maintain an important position among top importers of Indian basmati rice. Hence, these countries would serve a significant position in the total export earnings of India from Basmati rice. Similar results have been obtained in the study of Adhikari et al. (2016).