Geographical Indications of India Socio- Economic and Development Issues - Page 1

Gautam, Kumar a post graduate in Economics,is a research consultant. He has been engaged in policy research and advocacy for favourable changes on the livelihoods issues of farmers and artisans. H e has worked as policy and advocacy coordinator at All India Artisans and Craftworkers Welfare Association (AIACA), New Delhi. Besides having worked as a researcher with Institute for Human Development (IHD) and Centre for Trade and Development, both based in Delhi; he has been an articulate campaigner for fair, equitable and sustainable trade polices while working for Oxfam’s global campaigns namely ‘Make Trade Fair’ and ‘Economic Justice’. Kumar has published several research articles, case studies and articles on development issues in journals, newspapers and magazines both in English and Hindi.

March - April 2011, Craft Revival Trust

With Intellectual Property Rights (IPRs)1 increasingly influencing trades both at the national and international level; harnessing trade benefits depends on the degree of protection enjoyed by the owners of the IPRs. Geographical Indications (GI) is one of the six Trade-Related Intellectual Property Rights (TRIPS) of the World Trade Organisation (WTO)2 that seeks to provide comprehensive and effective protection to goods registered as GI goods. Geographical Indication (GI) is defined3 as any indication that identifies a good as originating from a particular place, where a given quality, reputation or other characteristics of the good are essentially attributable to its geographical origin. GIs may be associated with agricultural, manufactured or industrial goods. Non-agricultural products, which typically qualify for GI protection include handicrafts, jewellery, textiles, etc. (WTO, 2004). Given India’s historically vibrant and famous craft traditions, a number of craft genres and products from the crafts sector qualify as GI goods. If harnessed properly, trade gains from enhanced sale of these GI goods could provide tremendous socio-economic benefits to the producers of such goods. India, in compliance with the TRIPS Agreement of the WTO, enacted ‘The Geographical Indications of Goods (Registration and Protection) Act, (GI Act) on 15th September 2003 to provide protection to the goods registered under the Act. Seven years down the line, evidence from the ground suggests that while there has been some progress in terms of number of goods registered under the GI Act, there remain a number of issues and concerns in the context of harnessing the potential commercial benefits out of GI registration in India.

The Rationale underlying GI Protection
Huge information gaps (information asymmetry) exists in the markets today that lead to typical market information problems in the form of adverse selection and moral hazard (Akerlof, 1970). Information asymmetry impacts negatively on the market: the quality of total supply drops, higher-quality products are driven out of the market and some consumers are no longer able to satisfy their preferences (OECD, (2000). Producers maintaining the quality of their products are exposed to unfair competition from producers who sell lower quality products at the same price.This unethical practice of selling fake products in the name of reputed products to fetch better prices is rampant in the Indian market and even abroad. In India, for example, cheap powerloom saris are sold as reputed Banarsee handloom saris within and outside Banaras, harming both the producers and consumers of Banarsee handloom saris. While original producers suffer a loss of market for their goods, consumers end up paying inflated prices for fake goods. Consumers usually do not have perfect access to information regarding the prices of goods, and even less so to the quality of the goods (Nelson, 1970).

In a situation like this, GI protection has the potential to eliminate information asymmetry and benefit both the producers and the consumers (OECD, 2000). Once the goods are registered as GI, they will be protected under the GI Law and any violation on this account would be tantamount to a legal offence. If the Act is implemented effectively, it will act as a deterrent to unethical producers selling their low quality and cheap products free riding on the reputation enjoyed by GI goods.

The GI tag attached to products acts as a signalling device that helps producers to differentiate their products from competing products in the market and enables them to build reputation and goodwill around their products, which allows them to fetch a premium price. Eliminating information asymmetry is also the rationale of another IPR: Trademarks. But, there are at least two major differences between Trademarks and GI. Firstly, while Trademarks can be owned individually or by a group of people, GIs are collective rights owned by the concerned communities. Secondly, Trademarks can be transferred or assigned to another right holder but GI rights are perpetual collective rights. Besides, since most of these GI goods or potential GI goods have their origin in rural areas, the increased sales of these goods as a result of protection under the GI Act has the potential to lead to enhanced income to the producers’ communities and hence to rural development.

Historical Development
The term ‘geographical indication’ (GI) is a relatively new concept introduced by the TRIPS Agreement (WTO,1994).However , evidence suggest that the practice of using other closely related concepts existed even in the pre-industrial times. The concepts such as ‘appellations of origin’, ‘indications of source’ ‘designations of origin’ and ‘protected geographical indications’ used names of places and distinctive signs for variety of products as ‘indications of geographical origin’ (IGO). For example: Mt. Fuji sake and Pisa silk, Champagne, Florida Oranges, New Zealand lamb, Murano Glass, Swiss Watches, Bukhara carpets etc.

Prior to TRIPS agreement of the Uruguay round which concluded in 1994, there were mainly three international conventions dealing with protection of IGOs, i.e. the Paris Convention for the Protection of Industrial Property (1883), the Madrid Agreement (1891) and the Lisbon Agreement for the Protection of Appellations of Origin and their International Registration (1958). While the Paris Convention and the Madrid Agreement dealt with ‘indications of source’, the Lisbon Agreement focused on protection of ‘appellations of origin (Kasturi Das, 2006).In terms of providing global protection to these IGOs, however, these multinational treaties offered limited scope as these conventions were ratified only by few countries. Hence, signing of the TRIPS Agreement, which brought GI to the fore in multilateral negotiations; by more than 150 member countries was an important step forward for the international protection of IGOs. The agreement provided the ‘minimum’ standards of protection for GIs (along with all other IPRs) backed by an enforcement mechanism.

However, there remains the problem of a hierarchy in the levels of protection based on an arbitrary and specious categorisation of goods under the TRIPS Agreement. In international trade negotiations on IPRs, the European Commission has always shown keen interest and even aggression in seeking effective protection to GI goods. The negotiations, particularly on the GI section of TRIPS Agreement, were among the most difficult and this stemmed from clear division between the main proponents of the TRIPS agreement-the US and EU. The European Communities (EC) and Switzerland constantly emphasised on inclusion of GI in TRIPS during the Uruguay rounds of negotiation. The fact that GI was finally included in TRIPS agreement can be attributed to the EU’s remarkable negotiating capacity. The final outcome was tilted in the interest of the European countries. The Current TRIPS text provides a basic standard of protection to all other goods and higher standards of protection to wines and spirits in which they have clear advantages. The EC and its member states have a diverse portfolio of over 6,000 protected GIs. Socio-Economic Implications of GI in Developing Countries
It is interesting to note that unlike other IPRs, the concept of GI has been received favourably in the developing countries. The potential socio-economic benefits that GIs could accrue to developing countries have led many to believe that GI is the ‘sleeping beauty IPR’ (WIPO, 2007). Research on socio-economic implications of GI for developing countries is scarce and it is evident that most socio-economic studies of geographical indications have been done in European countries where the concept is well entrenched. Nevertheless, the literature review of these socio-economic studies does still hold relevance for their theoretical and methodological rigour and act as a guide-post. The key socio-economic issues relating to geographical indications particularly relevant to developing countries are misappropriation, protecting traditional and indigenous knowledge and culture, improving market access, creating niche markets, protection of reputation, potential income effect and rural development.

European policies and studies conducted in this area emphasize the potential of GIs to improve rural livelihoods based on local resources (Pacciani et al, 2001) and thus, advance rural development. Worldwide, rural communities have developed typical products based on the interaction between traditional-local know how (including selection, production and processing), cultural settings and particular environmental conditions such as the soil and climate (World Bank Report, 2004). The market mechanism, as it exists today, does not necessarily reward either these products or the producers.GI provides an effective framework to counter information asymmetry, leading to a process which can be viewed as ‘Institutionalisation of Quality’ that rewards such products and producers with premium prices.

Numerous empirical studies indicate that consumers are willing to pay a premium for origin- guaranteed products. A consumer survey done in Europe (WTO, 2004) revealed that 40 percent of consumers surveyed were willing to pay a premium as high as ten percent. Econometric studies have shown that consumers are ready to pay a high price premium for origin labelled wines. For instance, Bordeaux wine with ‘Pomerol’ designation, commanded a premium of $15 per bottle (Landon and Smith, 1998) and wines from Napa Valley fetched 61 percent higher premium than California wines (Bombrun and Sumner, 2003). The price premium is not restricted to wines. A study done by Loureiro and McCluskey, 2000 on meat products indicates that Galician Veal commanded a premium upto $0.21 per kilogram. Whether this premium will lead to increased income for producers actually depends on the capacity to implement effective enforcement.

While confirming GI as an effective strategic tool for development of rural enterprises, a study by the OECD (1995) pointed that the two main factors that influence the success of small rural enterprises are: market access and socially constructed differentiation. One of the effective approaches to address these factors is for the enterprises to work together in order to develop a competitive advantage. This sort of collective monopoly achieved through GI enabled the French origin-labeled cheeses earn an average of two euros per kilo more than French non-origin-labeled cheeses. French poulet de Bresse has a market price four times higher than regular French chicken.Producers of milk used for Comté cheese are paid 10 per cent over regular milk prices. Similarly, producers of Italian Toscano olive oil have managed to earn a premium of 20 per cent since registration as a geographical indication in 1998 (EU Background Note, 2004). The premium captured by products displaying a geographical indication suggests that some form of value is embedded in the use of GI which is a mixture of economic, cultural and social values reflected in product-place linkages. However, some studies also discovered that lesser known and lower quality products may earn small or insignificant price premiums, thus reinforcing the argument that GI registration itself is not enough for exploiting commercial benefits unless backed by promotional initiatives and quality maintenance mechanism (Loureiro and McCluskey, 2000).

In the context of developing countries, GI goods reflect strong links with localized specific production assets derived from local culture as it characterizes the “historical memory” of the local population and represents a catalyst of identity (Bérard and Marchenay,1995). As such, GIs draw from both natural and human resources located within the territory, thereby stimulating the rural economy. According to a study origin-labeled products are often considered useful instruments to preserve local culture and traditions and to foster rural development, especially in disadvantaged areas (Pacciani et al ,2001). According to the same study, the rural development impact depends on the extent to which local actors succeed in appropriating the rent with respect to actors located outside the territory. The potential of appropriating this rent is closely tied to the ability of local actors to create institutional processes that can regulate the use of these free goods (Pacciani et al., 2001). Thus, the rural development potential of GIs is dependent on an inclusive and representative Producers’ Association that ensures participation of local actors and capacity building of the PAs so that they are able to capture more of the rents from the production and supply chain.

Geographical Indication: The Indian Scenario
Unless a geographical indication is protected in the country of its origin, there is no obligation under the TRIPS agreement for the other countries to extend reciprocal protection. In India ‘The Geographical Indications of Goods (Registration and Protection) Act, 1999’ (GI Act) was enacted in compliance with India’s obligations under TRIPS at the WTO. The Geographical Indications of Goods (Registration and Protection) Act, 1999 (Act 48 of 1999) came into force with effect from 15 September 2003.This Act seeks to provide for the registration and better protection of Geographical Indications relating to goods in India to fulfil three key objectives:1. Adequately protect the interest of producers of GI goods and add to the prosperity of the producers of such goods, 2. Protect consumers from deception, and 3. Promote goods bearing GI in the export market.

The Indian GI Act defines “Geographical Indications in relation to goods as an indication which identifies such goods as agricultural goods, natural goods or manufactured goods as originating, or manufactured in the territory of a country or a region or a locality in that territory where a given quality, reputation or other characteristics of such goods is essentially attributable to its geographical origin and in the case of manufactured goods where one of the activities of either the production or of processing or preparation of the goods concerned takes place in such territory, region or locality, as the case may be.” Goods include any agricultural, natural or manufactured goods or any goods of handicraft or of the industry and include food stuff.

The salient features of the Act are mentioned under the following sixteen points:
  1. Definitions and interpretation of several important terms like geographical indications goods, producers, package, registered proprietor, authorised user etc.,

  2. Provision for the establishment of a geographical Indications Registry;

  3. Provision for the maintenance of a Register of geographical Indications in two parts-part A and part B and use of computers, etc, for maintenance of such registers. While part A will contain all registered geographical indicators ,part B will contain particulars of registered authorised users;

  4. Registration of geographical indications of goods in specified classes

  5. Prohibition of registration of certain geographical indications

  6. Provision for framing of rules by the central Government for filling of applications, its content and matters relating to substantive examination of geographical indications applications;

  7. Compulsory advertisements of all accepted geographical indications applications and for inviting objections;

  8. Registration of authorised users of registered geographical indications and providing infringement action either by a registered proprietor or authorised user;

  9. Provision for the renewal, rectification and restoration of geographical indication and authorised use

  10. Provision for higher level of protection for notified goods

  11. Prohibition of assignment etc. of a geographical indications as it is public property

  12. Prohibition of registration of geographical indications as a trade mark;

  13. Appeal against registrar decisions

  14. Provisions relating to offences and penalties

  15. Provisions detailing the effects of registration and the rights conferred by registration;

  16. Provision for reciprocity, power of registrar, maintenance of index, protection of homonymous geographical indication, etc.

To carry out the provision of this Act, the central Government notified a set of rules in 2002. The Government of India has established the ‘Geographical Indications Registry’ with all-India jurisdiction at Chennai, where the GIs can be registered. The controller General of Patents, Designs and Trademarks, who is also the registrar of Geographical Indication of India, is responsible for administering the GI Act. So far, 120 goods have been registered under the Act and many more are in the pipeline. Some of the well known GI goods are ‘Darjeeling’ (tea), Pochhanpalli Ikkat, Chanderi Handloom, ‘Basmati’ (rice), ‘Alphonso’ (mango), etc. An exhaustive list of registered GI products is available online at http://ipindia.nic.in/girindia/

Registration process for GI goods
Darjeeling Tea was the first good to be registered as a GI good in India. The need for Darjeeling Tea to get GI protection became pronounced when it was discovered that the volume of Darjeeling Tea being sold in in international markets was more than the volume being produced. This made it clear that gross misappropriation by way of free riding on the brand reputation of Darjeeling tea was taking place in the international market. The move for registration of Darjeeling Tea was initiated soon after the GI Act came into force and the process of registration was relatively smooth because it was initiated by The Tea Board of India which is a financially sound body and could afford hiring the services of all required legal, scientific and other technical experts.

The point which is being made here is that for GI registration, the nature and capacity of the applicant association is crucial. Once the need is felt for registration of a good as a GI good, the first and foremost requirement is the existence of a credible association that can be said to represent the interest of the producers of the good under consideration. The Indian GI Act says that any association of persons, producers, organization or authority established by or under the law is eligible to apply for GI registration. The applicant must represent the interest of the producers. Producers are defined as persons dealing with the following three categories of goods:

1) Agricultural Goods includes the production, processing, trading or dealing; 2) Natural Goods includes exploiting, trading or dealing; and 3) Handicrafts or Industrial goods include making, manufacturing, trading or dealing

The second stage is the submission of application for registration under the GI Act, 1999. The due diligence exercise requires tremendous amount of time, energy, money and technical expertise. The application has to include details of special characteristics of the product to convincingly prove the uniqueness and establish linkages between the product and its place of origin. The documentation process is extremely rigorous and requires elaborate audio-visual documentation. Most of the lead applicants/producers do not have the capacity/resources to undertake this process. Some hire legal and scientific experts to file the application on their behalf.

After the preparation of application is completed, applications can be filed and submitted by a legal practitioner or a registered agent and submitted to the Registrar of Geographical Indications, Chennai along with a prescribed fee. The application must in writing in triplicate in the prescribed format (available at http://ipindia.nic.in/girindia/). The application has to be signed by the applicant or his agent and accompanied by a statement of case.

After the application is submitted, the examiner at the Registrar’s office scans the application and any deficiencies have to be corrected by the applicant within one month. The content of the statement of case is assessed by a consultative group of experts in the area and an examination report is issued. Post this process, in case of any objection, the Registrar communicates with the applicant and is given two months to respond or apply for a hearing. The Registrar may also withdraw an application after the hearing.

Every application within three months of acceptance is published in the Geographical Indications Journal, which is bi-monthly and bi-lingual (Hindi and English) statutory publication. The Journals are published on the Registrar of Geographical Indications website and any person can file a notice of opposition within three months opposing the GI application published in the journal. At this stage, the applicant can send a copy of counter-statement which can be accepted or result in abandoning of the application after a hearing.

When an application of GI has been accepted, the Registrar registers the geographical indication and the applicant is issued a certificate with the seal of the Geographical Indications Registry. A registered GI is valid for 10 years and can be renewed on payment of renewal fee. Any person aggrieved by an order or decision can file an appeal to the intellectual property appellate board (IPAB) within three months. GI is a public property belonging to the producers and it cannot be transmitted, assigned or mortgaged. The Appellate Board or the Registrar of GI has the power to remove the GI or an authorized user from the register (also see Figure 1).

Figure 1: GI registration process in India

(Source: GI Registry office, Chennai)

The Textile Committee of India has been spearheading a nationwide campaign in India by creating awareness among various stakeholders of Textile and Clothing sector on the benefits of GI. The Committee identifies potential products and facilitates GI registration of the products. Some GI registrations that the Committee has facilitated include Pochampally Ikkat, Lucknow Chikan Craft, Banaras Saree & Brocades of Uttar Pradesh etc. The Committee has also supported state governments of Kerala and Uttar Pradesh for registration of some of the products. In this context, three studies were conducted by the Committee. The first focused on assessing the awareness among stakeholders on GIs and identifying potential products for registration under the act. The study identified more than 200 potential products for GI registration on the basis of threat perception. The second documented the specification and uniqueness of various products, which included the production process, historical origin etc. The third study, is currently being undertaken, analyses the post GI implication for Pochampally Ikat, Sholapur Chaddar and Terry Towels.

It is interesting to note (see Table 1) , that out of the total 120 registered GIs so far, 80 (66%) belongs to the handicraft category followed by agriculture 31 (26%), manufactured 7 (6%) and food stuffs (2%).

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