By Chandrajit Banerjee
A dynamic shift has taken place in India’s external engagement with the landmark achievement of the export target of $400 billion for 2021-22. This reflects the country’s accelerated growth graph post the pandemic moderation of 2020, but more emphatically, it moves the export needle from the level of the past few years. While raising the confidence of the business community regarding its global competitiveness, the achievement also sets a strong base for resurgent export growth of the future. We can now credibly target $1 trillion of merchandise exports and a similar level for services exports by 2030.
India has demonstrated effectively that it is fully capable of meeting global demand, adhering to international quality standards and ramping up capacity with flexibility within a short time period. The surge in global demand in the aftermath of the pandemic-related disruptions of 2020 caused unprecedented supply chain blockages, with shortages of containers, lockdowns in key manufacturing hubs, worker shortages and other factors affecting global trade. That Indian exports were able to overcome all of these challenges is indeed a heartening signal.
India’s robust performance over April 2021 to February 2022, crossing 46% growth over the same period for 2020-21, is remarkable also because it came at a time when the country was still dealing with its own lockdowns following the second wave of the pandemic. The total export was also about 28% higher than the same period in 2019-20, before the pandemic hit the shores. The inherent resilience and flexibility of Indian manufacturing companies was underscored convincingly during the year, setting a precedent for coming years.
While commodity price increases have contributed to the overall growth of about $118 billion over the previous year, the growth in non-oil, non-gems & jewellery exports stands at almost 34%, which is a significant jump-shift. Excluding these two large export sectors, the products that have displayed high growth include iron and steel at close to $10 billion, machinery ($5.6 billion), vehicles ($5.5 billion), and electronics ($4.9 billion). Another 14 products exhibited additional exports of more than $1 billion over the previous year, including cotton, organic chemicals, cereals, plastics and fish products, attesting to India’s diversified export base.
It is to the credit of the central and state governments that despite the global and domestic challenges arising from various factors during the year, the manufacturing environment remained well functioning across the supply chain. A stable rupee exchange rate, stability in policies, credit support to MSME sector and trade facilitation measures also helped exporters to keep their supply chains running smoothly. Schemes to promote electronics, food processing, and marine products, among other policies, contributed to building the requisite capacity to ramp up domestic production.
The $400-billion export milestone represents a platform to further expand exports with dedicated efforts in mission mode. The Government has often called for making in India for the world, and this is now entrenched as a new path for Indian goods. While global trade growth may revert to its usual trend line next year, India can strategize to acquire greater share of global exports by building manufacturing in its existing product base as well as looking at emerging products.
According to an analysis by CII, the highest export potential exists in the sector of electronics, which would continue to remain among the top globally traded items due to rising intensity of digitalization. Machinery, vehicles, pharmaceuticals and plastic products are the others in the top five categories that have the potential to contribute the most to the $1 trillion target. Traditional items of strength such as textiles and apparel, food processing and leather products can also be stepped up. Some products where India enjoys the capability to capture larger export share are organic chemicals, optical and medical equipment and essential oils.
Apart from these, India should also look at emerging sectors such as solar panels, wearables and hearables, drones, robotics and so on. The recent production linked schemes in some of these sectors would go a long way in raising manufacturing investments and production.
It is also important for India to look beyond manufactured goods to agricultural products, where the country has recently performed well, and to services. The service sector growth during April 2021 to February 2022 (estimated) over the same period last year was robust at 22%. However, most of this is concentrated in the categories of software and other business services. Globally, trade in services is led by sales through the establishment of foreign controlled affiliates (mode 3) and cross-border services transactions (mode 1) also has a high share. India should introduce a strategy for enhancing its overseas investments to gain greater share in global services exports.
The $400 billion export achievement is indeed laudable and strengthens Indian industry resolve to look outward for its growth with the encouragement of the government.
The author is Director General, Confederation of Indian Industry. Views are personal and not necessarily that of Financial Express Online.