As exporters brace themselves to tackle the yet unfathomed global trade slowdown, with exports falling by as much 12.1% in October, it would be worthwhile to investigate the prospects of India?s important merchandise export sectors and especially for those products that enjoy a significant share of the global market. To get a proper perspective of the likely export trends in the tough times that are to come, it is pertinent to first investigate how Indian exports have fared in the recent years when international trade soared to new highs in one of the most buoyant performances in decades.
At the global level, agriculture exports were a major gainer with growth going up by 13% in 2000-07 after registering a fall of 1% in the latter half of the nineties. The gains made by manufacturing exports in the current decade were also exemplary with growth pushing up to 12% in 2000-07 after slowing down from 9% in the first half of the nineties to 5% in the second. Indian export performance in the different products group varied sharply. A very notable achievement was the sizable pick up in agriculture exports. In fact the numbers show that the 15% annual average growth of agriculture products was only marginally below that of three other large economies, namely Brazil, Russia and Indonesia.
Consequently, India?s share of agriculture exports has gone up from 1.1% in 2000 to 1.4% in 2007, much faster than the overall growth of Indian merchandise exports whose share in global trade was much lower at 1.1% in 2007. Gains on the manufactured product exports have been equally large with the Indian share in global trade going up from 0.7% to 1% between 2000 and 2007. What is more remarkable is that the 16% annual average growth in India?s manufacturing exports was much higher than other major Asian economies except China where the growth was 26%. The six most important manufactured products where India had a sizable share of the global markets in 2007 were textiles (4%), clothing (2.8%), automotive products (2.4%), iron and steel (1.7%), pharmaceuticals (1.2%) and chemicals (1.1%). The gains in the boom years made by these sectors however varied sharply.
Trends for the 2000-07 period show that the highest gains in global share were made by the automotive product group, where the global share increased by as much as one percentage points during the last seven years. The second largest gainer was iron and steel, where the global share went up by 0.8 percentage points. Chemicals and textiles fared third in the rankings with their share of global trade increasing by 0.4 percentage points respectively. Surprisingly the share of the much lauded pharmaceutical sector went up by a meager 0.1 percentage point. The only major product where India global share declined was clothing where India?s global exports declined by 0.2 percentage points.
Growth prospects in the coming months would be affected by the slowdown in the major export markets. However, if one looks at past trends the sectors that are likely to fare the worst are the traditional items like textile and clothing where growth has steadily decelerated, even in the boom years. While export growth slipped from 13% to 7% over the last three years in the case of textile, the dip was much sharper in clothing where it fell from 26% to 2%. Chemicals, where the export growth has almost halved to 16% over the last three years, will also bear a larger burden in the coming months.
The other major export segment that will be hurt by the slump in global trade will be automotive products where export growth has stagnated at around 14% over the last two years. Steel is also likely to face more tariff and non-tariff barriers as the large capacities created in the boom years go idle. The only segment where the export markets are likely to remain resilient is pharmaceutical products where export growth has accelerated from 22% to 31% over the last three years. And demand for cheap generic medicines, which are India?s forte, is unlikely to disappear as fast as other non-essentials.
?p.raghavan@expressindia.com
