Context:
Jamnagar in Gujarat is the top exporting district in India. It formed about 24% of India’s exports in value terms in FY23 (till January).
- Surat in Gujarat and Mumbai Suburban in Maharashtra feature second and third by a distance, forming only about 4.5% of the country’s exports in the period.
Relevance:
GS III: Indian Economy
Dimensions of the Article
- Status of India’s Export Sector
- Challenges Facing the Export Sector in India
- Way Forward
Status of India’s Export Sector
Trade Deficit:
- Merchandise trade deficit increased by over 39% to USD 266.78 billion in 2022-23, compared to USD 191 billion in 2021-22.
- Merchandise imports rose by 16.51% in 2022-23, while merchandise exports increased by 6.03%. • Overall trade deficit stood at USD 122 billion in 2022-23, compared to USD 83.53 billion in 2022.
Top Export Sectors:
- Engineering Goods: registered a 50% growth in exports at USD 101 billion in FY22.
- Agriculture Products: exports were buoyed by the government’s push to meet global demand for food amid the pandemic. India exports rice worth USD 9.65 billion, the highest among agricultural commodities.
- Textile and Apparels: exports (including handicrafts) stood at USD 44.4 billion in FY22, a 41% increase YoY. Government schemes like Mega Integrated Textile Region and Apparel (MITRA) Park are giving a strong boost to this sector.
- Pharmaceuticals and Drugs: India is the third-largest producer of medicines by volume and the biggest supplier of generic drugs. India supplies over 50% of Africa’s requirement for generics, around 40% of generic demand in the US, and 25% of all medicine in the UK.
Current trends:
- All pumps, tools, carbides, air compressors, engines, and generators manufacturing MNC companies in India are trading at all-time highs and shifting more production units to India.
- Agricultural exports and textiles are expected to remain strong in the coming years.
- India is expected to become a major player in the electric vehicle (EV) space and is actively working towards building capacity in EV batteries and charging infrastructure.
Challenges Facing the Export Sector in India:
Access to Affordable and Timely Finance:
- Exporters require affordable and timely finance to sustain their operations and grow their businesses.
- However, many Indian exporters struggle to obtain finance due to high interest rates, collateral requirements, and limited credit availability, especially for small and medium-sized enterprises (SMEs).
Limited Diversification of Exports:
- India’s export basket is highly concentrated in a few sectors, such as engineering goods, textiles, and pharmaceuticals.
- This makes the country vulnerable to fluctuations in global demand and market risks, as the lack of diversification limits its resilience to changing trade dynamics.
Impact of Protectionist Trade Policies:
- With the disrupted global political order and weaponization of supply chain, many countries are moving towards protectionist trade policies.
- These policies are shrinking India’s export capacities and posing a significant challenge to the country’s export sector.
Way Forward
Improving Infrastructure and Logistics
- India needs to invest in transportation networks, ports, customs clearance processes, and export-oriented infrastructure such as export promotion zones and specialised manufacturing zones.
- Improved infrastructure and logistics can reduce transportation costs, improve supply chain efficiency, and boost export capabilities.
Skill Development
- Skill development programs should be implemented to enhance the availability of skilled labor in export-oriented industries.
Promoting Technology Adoption
- Incentivizing and promoting technology adoption, such as automation, digitization, and Industry 4.0 technologies, can boost productivity, competitiveness, and innovation in the export sector.
Exploring Joint Development Programs
- India can explore joint development programs with other countries in sectors like space, semiconductor, solar energy to improve India’s medium-term growth prospects.
Diversification of Exports
- To reduce the vulnerability of India’s export sector to global demand fluctuations, it is essential to diversify its export basket across different sectors and countries.
Exports as an Engine of Growth
- Exports cannot be the sole engine of growth amidst a wave of deglobalization and slowing growth.
- India needs to focus on developing other sectors such as agriculture, services, and manufacturing, to ensure sustainable economic growth.
-Source: The Hindu
