Looking back at the study conducted by the Organization for Economic Co-operation and Development (OECD) in 1995, various factors were identified for influencing the success of entrepreneurial attempts. Among them, two main factors have a significant impact: market access and differentiation. Geographical Indications come under the differentiation factor since they create differentiation per the products, their quality, and what contribution they establish in the niche market. It acts as the leading economic principle for protecting geographical indications. A GI can serve as the most powerful tool in the market since it differentiates the products by their origin or area, thus restricting the supply and creating a barrier to others from entry, hence improving market access.
Improving the income effect, establishing a regulatory framework to prevent the misappropriation of origin-based products, and safeguarding their reputation may significantly impact development. This, in turn, directly contributes to boosting a country’s economy. But when we talk about developing countries, they are at the nascent stage, unlike developed countries. At present, India boasts of a 350-granted GIs lineage. It was the Darjeeling tea that was first awarded the GI tag in the year 2004-05 in India. Other examples are Mysore silk, Coorg orange, Basmati rice, etc., which have been accorded GI protection.
When we talk about the economic impact of geographical indications, it is evident that after it was awarded, Darjeeling tea saw a five-fold change in its domestic price; even the costs of basmati rice and Thanjavur paintings have doubled. Thus clearly explaining its impact on the economy. However, the capacity to increase the revenue through GI depends on the country’s ability to implement its effective enforcement.
A GI’s primary function is to differentiate a product from competitors to appeal to market sensibilities. Even though nations worldwide are working to register their geographical indications, India stands out for the diversity of its GI protection. Textiles, handicrafts, paintings, agricultural, horticultural, and beverage products are just a few of the items with GIs that are approved in India. Contrast this with the situation in Europe, where GIs are typically associated with wines, alcoholic beverages, or other agricultural and food products.
The best example for understanding the economic impact of GI is by evidencing the “Pochampally Ikat,” which is a unique old-age fabric coming from the districts of Nalgonda and Warangal in Andhra Pradesh. For this, the industry consists of almost 1000 weaving households and around 5000 weavers working in nearly 2000 traditional pit looms. However, a decline hit on the creation of the products out of “Pochampally Ikat.” This led to low productivity rates and negligent market efforts, obliterating the industry. However, as per the Pochampally Handloom Tie and Dye Manufacturers’ Association, GI protection was granted on 31st December 2004, the first handloom product to be registered as GI in India. This increased its demand and the weavers’ wages by up to 20%.
GIs may help create a “regional brand” in a given area. For instance, in India, both inside and outside the Varanasi region, low-cost power loom-made sarees are sold as well-known “Banarasi” handloom sarees. Geographical indications are typically applied to agricultural products and handicrafts, and the government is exploring using GI tags for more products to increase their export value. According to recently released data from the commerce ministry, India’s exports grew by 48.34% between May 2020 and June 2021, reaching US$ 32.5 billion, thanks to solid growth in the country’s exports of chemicals, gems, and jewelry, as well as petroleum products. This growth was continuously observed for seven months; June 2020 exports were $22 billion, and June 2019 exports were $25 billion.
