Indian Exports- the current scenario

India’s exports have declined for six consecutive months since DecemberIndia’s export basket is now highly diversified. Manufactured products constitute the largest share (around 67%), followed by petroleum products at 18%, agriculture products at 12.5% with ores and minerals contributing 1% to total exports. India is one of the few emerging economies whose share of manufactured goods in total exports has declined continuously over the years. India has diversified its export destination from developed economies to others in the last decade. Earlier more than 50% of India’s merchandise exports went to key developed markets like the US, the euro area, UK, Canada, Australia and Japan. But a decade and a half later, the situation has dramatically changed. Now only a third of India’s exports go to these developed markets and 71% goes to various emerging economies with 49% going to Asian economies. The recent falling commodity prices explain some weakness in export growth, but that is only part of the story. In terms of exports by destination, exports to the US have become the key support to overall exports in the last couple of years, in line with the gradual recovery of the US economy. India failed to improve its market share in its existing markets in developed economies while it diversified into other emerging markets. This is a purely defensive response and does not augur well for its future export performance because advanced economies will continue to have by far the largest share in global imports for the foreseeable future. Excessive diversification of India’s exports, both in terms of products and destinations, has made exports sensitive to global growth. India has managed to diversify its exports but with mixed results failed to claim a large market share in any export product category in the world and does not have depth in any of the export product or a market. A detailed study of manufactured product exports reveals that unskilled labour-intensive segments like textiles and leather have performed poorly despite the fact that India has a competitive advantage in the sector and there is a huge demand in the developed markets. India has to thus identify the sectors where it has a natural competitive advantage and focus sharply on providing necessary infrastructure and skills for these sectors. These sectors can also lead India’sefforts to integrate with global production networks which depend critically on the availability of adequate infrastructure and the ability to attract export-oriented FDI as in the automobile industry. Some macroeconomic factors like an appreciated rupee and rise in real wages have hurt export performance. This can be compensated by replacing capital-related subsidies with labour and employment-related promotion activity to reverse the trend of rising capital intensive exports. The inability to increase India’s share in global markets, in general, and in advanced economy markets, in particular, points sharply to the need for a thorough review of the working and performance of export promotion councils and other agencies like the Federation of Indian Export Organisation, StateTrading Corporation and Minerals and Metal Trading Corporation.

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