GENEVA: Until February 2021, Indian goods exports had surpassed $30 billion in a month only on five occasions ever. The $30-billion mark was seen as what is called a psychological barrier in cricketing terms. Since March 2021, ten months in a row now, India has clocked more than $30 billion in goods exports.
In fact, three times in the current financial year 2021-22 (FY 2021-22) in July, October and December 2021, Indian goods exports went past the $35-billion mark, with the highest ever exports clocked in December at $37.81 billion. In the first nine months of FY 2021-22, total goods exports have hit the $300-billion mark. For the first time ever, India is poised to hit $400 billion of exports in one financial year.
What is even more encouraging is that the outlook remains buoyant as well. The Federation of Indian Export Organisations has signalled that the export surge we are witnessing will likely extend into FY 2022-23. This apex organisation of Indian exporters is talking about $460-$475 billion in goods exports in FY 2022-23, which demonstrates the increasing confidence in the export story. It also indicates a more structural shift with India gaining global export market share in the aftermath of the Covid-19 pandemic.
When a strong export print started to develop in April 2021, the start of FY 2021-22, some commentators wished it away attributing the upwelling to rising commodity prices. When the numbers continued to increase for a couple of more months, the robustness was attributed to global inflation and shipping costs rising manifold. In fact, linking all trade data to global commodity or shipping prices has long been the most common commentary template in the Indian media.
Indeed, the global trade uplift this year includes both a value as well as a volume contribution. But in the initial analysis, the value contribution was wrongly ascribed solely to price point shifts. There indeed has been a value increase, and it is not just about higher pricing of the same volume of the same exports.
The value shift is actually an up-levelling of India’s export basket. It is structural in nature and it is also coming from more manufactured goods leaving Indian factories for overseas destinations. Through this financial year, India has exported not just commodities but has also gained market share in processed goods across categories. And this is the real cherry on the cake story of the oncoming $400-billion export mark.
In a recently published report by Credit Suisse, economist Neelkanth Mishra has demonstrated that in the calendar year 2021, manufactured goods exports may have been in the range of $265-billion. Extrapolating to FY 2021-22, this number may inch closer to the $300-billion mark. In a few years in the last decade, manufactured goods exports crossed the $200-billion level intermittently. But value growth has come this year on account of higher value addition from the Indian industry, which is a heartening sign.
While pharmaceuticals and gems and jewellery are known strong areas of Indian exports historically, significant gains have been made in automobile, chemicals, light machinery, electronics and textiles this year.
Passenger vehicles exports were up 46 per cent in the first nine months of FY 2021-22 over the same period of FY 2020-21, cushioning the industry against uncertain domestic demand and the vagaries of the pandemic domestically. India has exported almost 37 million units of passenger vehicles in this period.
Electronics is a category which holds great promise for exports. About 30 per cent of all global goods trade today comes from this category. India has doubled its share of mobile phones made locally from 5 per cent to 10 per cent in the last four years since this sector became a policy focus. With the general ecosystem maturing leveraging various policy interventions the central government has brought in, this is the sector to watch and not just for mobile phones. With the opportunities of gaining higher market share in this category as geopolitics forces manufacturers to search for new locations, the upside is high. Attempting to cover the entire value chain, the government is also trying to attract semiconductor design and manufacturing to India.
In chemicals, India now holds 3 per cent of the global export share and this number is growing. The category itself makes up for about 10 per cent of all Indian exports already. Specialty chemicals have been India’s strong point.
In textiles, India was never able to gain an upper hand against the more cost effective and less labour standards conscious Asian competitors. However, growth has returned to this sector, especially in the upstream yarn and fabric products. The growth in readymade garments is only now beginning to catch up but there is a clear uptick.
There are several growth stories outside of these high value categories. Home improvement products like laminate, wooden furniture, sanitaryware and ceramic products have also witnessed continued momentum, though the category contribution to India’s export basket is small.
In agriculture, India broke into the top ten global exporters in FY 2019-20. In FY 2020-21, exports crossed the $41-billion mark. In FY 2021-22, these exports are expected to reach the $50-billion mark. Since several agricultural commodities trade in cycles and are dependent on factors like global weather patterns and output in other countries as well, a linear growth may not be practical. But in recent years, even agriculture is becoming more remunerative.
Facilitative policy environment underpinned by Production Linked Incentives (PLIs) is helping bring back heft to Indian manufacturing. Global and Indian firms are already manufacturing a range of goods for Indian and global markets in many sectors. The PLI program is planned to be implemented in 13 sectors and each sector has a different coverage time frame. An uplift in manufacturing capacity, skills and technology will help India industrialise faster. The best feature of the PLIs is that the policy embraces global industrial leaders—it is not a protectionist programme only for Indian firms.
India’s exports now form almost 2 per cent of total global exports. Exports themselves may add 2.4 per cent to India’s gross domestic product (GDP) over the next five years, as per Credit Suisse estimates. Gains in industrial capacity always lead to a right shift in technology as well as product manufacturing maturity. These are encouraging signs and times—this decade can potentially mark a turning point in India’s industrial journey.
(The author is Counsellor in India’s Permanent Mission at the World Trade Organization, Geneva. Views expressed in this article are personal.)
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