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India is emerging as a global hub for exporting processed, powdered and value-added spice products, and looking at countries like China and Vietnam to secure supplies, according to a report.
"Some of the countries which previously imported whole spices have shifted to imports of ground and blended spices from India," explained Rabobank analyst Shiva Mudgil.
This is creating a shift from merchant export businesses to process manufacturing businesses, he added.
"Demand for oleoresins and seasonings has also led many Indian players to focus on research and technology in order to manufacture innovative products," he said.
"Structural changes in the global spice market means India, historically a bulk commodity supplier of spices, is now becoming a global hub for exporting processed powdered and value-added spice products, such as oleoresins, oils, extracts and seasonings," Rabobank's report 'Decoding the Spices' said.
Domestic players are setting up processing infrastructure to tap the growing demand.
India's exports have grown by 20% in the last four years in value terms and this trend will continue, the report said.
There is a growing aspiration among domestic players to expand into untapped geographies and new product segments.
This will lead to a greater need to access capital and product technology, it added.
"Some of the Indian processors are looking to other countries, such as China and Vietnam, to secure supplies for meeting this demand," the report said.
However, upstream sourcing challenges need to be addressed to fully tap this potential, it further added.
The Indian spice market is fragmented with the production largely based on a marginal farming business model, the report said adding small farm landholdings will remain important in the foreseeable future.
Sourcing quality spices to meet this growing demand will be a critical challenge, it added.
India's estimated production of spices is 5.9 million tonne in 2012-13, and about 11.5% of the total goes to exports, amounting to 0.7 million tonnes.
Key export markets are the United Arab Emirates (UAE), the US, the EU and Malaysia.
Chilli, turmeric and cumin are the key spices being exported.
