India’s merchandise exports have undergone a major shift in recent years. The change has been rather silent except for the occasional buzz about export of iPhones. But it is not just about Apple’s flagship product. India’s share in the global export of machinery, phones, automobiles and petroleum has grown significantly between 2015 and 2022. Meanwhile, there has been a marked decline in India’s share in its traditional export items such as gems and jewellery, apparel, meat and leather articles. Exports of textiles, clothing and made-ups, for instance, fell by about 17% y-o-y in FY2023.
Is this change temporary or will this be a permanent feature of our trade order?
An analysis of the data by Delhi-based trade think tank Global Trade Research Initiative (GTRI) shows India’s exports in the category called electronics, telecom, mobile phone etc., jumped from $7.9 bn in 2015 to $26.6 bn in 2022 — from 0.41% share of world market to 0.71%, a 73% rise. In machinery, India’s global market share rose from 0.75% to 1.05%, a growth of 40%.
The analysis for the same period lists other performing sectors such as petroleum (share in global trade went up from 1.87% in 2015 to 2.45% in 2022) and automobile and its components (from 1.11% to 1.32%).
All figures pertain to calendar year.
India’s share in world merchandise export in 2022 was 1.8%. If services exports are also added, the share would go up to 2.4%. The figure is still low when compared with India’s 3% contribution to the global market cap or 3.4% share of global gross domestic product (GDP). In FY23, India’s merchandise export was $447 bn, registering a 6% rise YoY. If goods and services are combined, total exports ($770 bn in FY23) registered a healthy 13.4% rise.
Meanwhile, among Indian merchandise export products, which lost glob- al market share in recent years, gems and jewellery’s down- swing has been staggering. Its share dropped from 7.4% in 2015 to 4.7% in 2022, a fall of 36% in seven years, according to GTRI’s analysis. Exports of apparel (-19%), meat (-48%) and leather (-20%) showed substantial drops in the global market. As far as pharmaceuticals are concerned, exports rose but their share in the global market dwindled.
Losing the sheen
While acknowledging that the shrinking of India’s share in total gems and jewellery export has been a matter of concern, Colin Shah, MD of Kama Jewellery, tells ET that passing the Development of Enterprise and Service Hubs (DESH) Bill, now pending in Lok Sabha, is essential to get big foreign jewellers to invest in India.
“Big jewellers have been moving to countries such as China, Vietnam, Indonesia and, in particular, Thailand. But they are hesitant to invest in India. Also, India has to sign several more free trade agreements (FTAs) like the one signed with the United Arab Emirates. Only then will the sector be far more competitive,” says Shah, a former chairman of the Gem & Jewellery Export Promotion Council. DESH Bill is aimed at changing the laws under the Special Economic Zone (SEZ) Act of 2005, and making them more industry-friendly.
According to Jayant Dasgupta, former ambassador to the World Trade Organization (WTO), jewellery made of rhodium, platinum, etc., are doing exceptionally well in the global market. As India’s strength is only in gold and diamond, he says, its share in world trade has been falling. “By and large, India’s exports have performed well in new technologies such as electronics, mobile phones as well as machinery. But in traditional sectors we are losing out. Our wages, for example in apparels sector, are on the higher side as compared with our competitors such as Bangladesh or Vietnam,” he says, adding that India is still relying too much on cotton exports when noncotton fibres (manmade fibres or MMFs) are more popular globally.
Mithileshwar Thakur, secretary-general of the Apparel Export Promotion Council, is optimistic that the PM MITRA (Mega Integrated Textile Region and Apparel) scheme will be a game-changer as it will integrate the textile value chain and bring down logistics cost and make the sector globally competitive. “Our mantra is to upscale value chains and increase our share in winter clothing by moving towards synthetic fabrics-based apparel. We are also exploring new markets beyond the US and Europe and are developing new products,” he says. “Production Linked Incentive (PLI) scheme for MMF fabrics and garments will attract muchneeded investment in these critical areas, and the signing of more FTAs will remove tariff disadvantage for our exports, thereby helping the sector immensely,” he adds
Dasgupta points out that India needs to follow the latest global trends. “Demand for heavy leather jackets and overcoats, for instance, has been slowing down globally. People now prefer light synthetic materials. These products are generated from the petrochemical sector. We are losing out on this segment,” he says. “Also, we are weak in another popular category —sports shoes.”
In leather articles, India’s exports moved up marginally from $2.4 bn in 2015 to $2.7 bn in 2022, but in terms of its share in world exports, there was a fall from 3.6% to 2.9%. Italy, the world’s biggest leather exporter, banks on high-quality branded products. Other prominent leather-exporting nations and India’s competitors include the US, Brazil and China.
Among the categories whose share in global trade have risen in the recent past, the most prominent is ‘electronics, telecom, mobile phones and electrical equipment’. Vinod Sharma, MD of Noida-headquartered Deki Electronics, says electronics exports have been growing steadily, at 7-8% annually.
“Electronics exports are now a settled business. But the real r o c k star in this category is the mobile phones and, to an extent, telecom equipment, driven by 5G technology,” says Sharma who was a chairman of the Electronics and Computer Software Export Promotion Council of India (ESC). He adds that the industry is now emphasising a lot on green items, for example, solar inverters, which have a huge demand globally.
A senior executive of the Engineering Export Promotion Council of India (EEPCIndia) says India’s export numbers are robust in machinery because all types of machines, including boilers, pumps, refrigerators as well as industrial machinery for dairy, food processing and textiles, are seeing a huge demand. The US, Germany, Thailand, China and the UAE are some of the major destinations. In the electrical machinery and components category, France is also a big buyer. “We anticipate some negative impact due to slowdown in advanced economies, particularly the US (the biggest buyer),” says the EEPC official, requesting anonymity.
According to International Monetary Fund’s (IMF’s) World Economic Outlook, April 2023, the growth in the volume of world trade is expected to decline from 5.1% in 2022 to 2.4% in 2023, thus “echoing the slowdown in global demand after two years of rapid catchup growth from the pandemic recession and the shift in the composition of spending from traded goods back toward domestic services”.
Clearly, this outlook is way lower than what was achieved during the two prepandemic decades (2000–2019), when it averaged 4.9%. According to the same report, the advanced economies’ import volume (goods and services combined) will decline from 6.6% in 2022 to a measly 1.8% in 2023 before rising marginally to 2.7% next year. The economic headwinds will slow down global trade. But its impact will be short lived. “In the longer term, India’s technological innovation will determine the acceptability of its products and their global market share,” says Dasgupta.