How India’s Exports Are Concentrated in a Few States

Why is it in News?

• Recent analysis using the RBI Handbook of Statistics on Indian States 2024–25 shows India’s export growth is increasingly concentrated in a handful of States, raising concerns about:
  • Regional inequality
  • Jobless export growth
  • Breakdown of the traditional export–industrialisation–employment link
• Despite a weakening rupee and record export values, export-led development is not translating into broad-based industrial employment.

Relevance

• GS III – Indian Economy
  • Export-led growth model
  • Industrialisation and jobless growth
  • Capital deepening and labour absorption
• GS I – Regional Development
  • Inter-State disparities
  • Core–periphery model

Core Export Concentration:

• Top 5 exporting States:
  • Maharashtra
  • Gujarat
  • Tamil Nadu
  • Karnataka
  • Uttar Pradesh
• Share of national exports:
  • ~65% (5 years ago)
  • ~70% now
• Implication:
  • National export aggregates mask severe regional divergence.

Rising Geographic Concentration (HHI Evidence)

• Export geography measured using Herfindahl–Hirschman Index (HHI):
  • Rising HHI → increasing concentration.
• Pattern emerging:
  • Core–periphery structure
    • Coastal western & southern States → tightly integrated into global supply chains.
    • Northern & eastern hinterland → decoupling from export growth.
• Agglomeration logic:
  • Firms prefer existing industrial clusters due to:
    • Logistics efficiency
    • Supplier ecosystems
    • Skilled labour pools

Global Context: Why Convergence Is Failing ?

Shrinking Global Trade Window

• World Trade Organization data:
  • Merchandise trade volume growth slowed to 0.5–3% band.
• UN Trade and Development (2023):
  • Top 10 exporters control ~55% of global merchandise trade.
• Consequence:
  • Latecomers face entry barriers.
  • Global capital now seeks complexity, not just cheap labour.

Shift from Volume to Value

Economic Complexity Trap

• Modern exports cluster around dense product spaces:
  • Automobiles
  • Electronics
  • Precision machinery
• These sectors:
  • Require advanced logistics
  • Depend on accumulated industrial capabilities
• Regions exporting low-complexity goods face:
  • High barriers to upgrading
  • Weak backward–forward linkages.

Export Growth ≠ Employment Growth

Capital Deepening Evidence

• Annual Survey of Industries (ASI) 2022–23:
  • Fixed capital growth: +10.6%
  • Employment growth: +7.4%
  • Fixed capital per worker: ₹23.6 lakh
• Indicates:
  • Rising capital–labour ratio
  • Factories becoming less labour-absorptive.

Manufacturing Employment Stagnation

• Periodic Labour Force Survey (PLFS):
  • Manufacturing employment share:
    • Stuck at ~11.6–12%
  • Despite record export values.
• Interpretation:
  • Employment elasticity of exports has collapsed.
  • Exports are generating value, not mass jobs.

Capital Bias & Wage Compression

• ASI data shows:
  • Wage share in Net Value Added (NVA) declining.
  • Productivity gains in:
    • Petrochemicals
    • Electronics
  • Gains accrue disproportionately to capital owners.
• Outcome:
  • High industrial GDP growth
  • Limited mass prosperity

Spatial Stickiness of New-Age Exports

• Electronics exports (PLI-driven):
  • ~47% YoY growth
  • Locked into:
    • Kancheepuram (TN)
    • Noida (UP)
• Reason:
  • High supply-chain complexity
  • Precision logistics unavailable in hinterland districts.

Financial Divide: Credit-Deposit Ratios

Coastal vs Hinterland

• RBI Credit–Deposit (CD) ratios:
  • Tamil Nadu, Andhra Pradesh: >90%
    • Local savings reinvested locally.
  • Bihar, eastern Uttar Pradesh: <50%
    • Savings mobilised but lent elsewhere.
• Effect:
  • Capital flight from hinterland to coast
  • Reinforces regional divergence.

Structural Diagnosis

• Exports no longer act as:
  • A bridge from agriculture → industry
  • A mass employment generator
• Instead, exports are now:
  • An outcome of prior structural capacity
  • A mirror of accumulated industrial wealth.

Policy Implications

Why Old Assumptions Fail ?

• Export-led growth ≠ labour-intensive industrialisation.
• India bypassing East Asian trajectory of:
  • Low-skill manufacturing
  • Broad middle-class creation.

Need for New Metrics

• Export growth ≠ inclusive development.
• Policy must track:
  • Employment elasticity
  • Wage share
  • Regional diffusion
• Otherwise:
  • Risk mistaking outcomes for instruments.

Bottom Line

• India’s export success is real but narrow.
• Without correcting:
  • Capital bias
  • Financial asymmetry
  • Human capital gaps
• Export growth will deepen regional inequality rather than resolve it, making inclusive industrialisation increasingly elusive.

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