<p>India’s merchandise exports have shown remarkable performance since the 1991 economic reforms. During the early phase of reforms, it took as many as nine years (FY92–FY2000) to double the exports; however, within the next 10 years (FY2000–FY2009), exports increased by nearly five times. The opening of trade has contributed to higher economic growth, as reflected in the rising value of the Trade Openness Indicator (ratio of merchandise trade to GDP). Liberalisation of trade through the removal of trade restrictions, elimination of exchange rate controls, export incentives, and rationalisation of tariff structure has contributed to a change in trade patterns and a shift towards non-traditional export markets.</p>.<p>The government’s emphasis on export diversification both across regions and products through the launch of the Focus Product Scheme and Focus Market Scheme has played<br />a key role in diversifying India’s exports to new markets.</p>.<p>The share of the top 10 countries in India’s merchandise exports registered a declining trend, falling from a high of 56.6 per cent in FY2000 to 46.8 per cent in FY23, signalling regional diversification of exports. Further, the Regional Herfindahl Index (an estimate of the concentration of exports across countries) for the top 10 countries decreased from 0.068 in FY2000 to 0.042 in FY23. Post-FY2000, Asian, African, and Middle Eastern nations, such as the UAE, Singapore, Hong Kong, and China, have replaced India’s traditional export partners, such as the UK, Germany, and Belgium. The share of Europe, which was around 40.9 per cent of India’s merchandise exports in FY92, fell to 19.2 per cent in FY15. However, the combined share of the developing regions—Asia and Africa—in India’s total exports rose from around 37.5 per cent in FY92 to 51.4 per cent in FY23.</p>.<p><strong>Also Read | <a href="https://www.deccanherald.com/business/business-news/india-s-export-share-in-world-trade-in-pharma-jewellery-footwear-dips-in-2022-gtri-1222099.html" target="_blank">India’s export share in world trade in pharma, jewellery, footwear dips in 2022: GTRI</a></strong></p>.<p>In terms of sectoral diversification, the share of petroleum and crude products in overall exports has increased considerably since FY2000, registering a CAGR of 7.3 per cent. Due to the availability of Russian cargo at a discounted price, India’s imports of petroleum products from Russia increased from 6.8 million tonnes in FY22 to 57.1 million tonnes in FY23, surpassing Iraq. This led to an increase in the share of petroleum products in total exports, which rose from 16 per cent in FY20 to 21.6 per cent in FY23.</p>.<p>Driven by the strong push given by the PLI scheme, along with measures like the Phased Manufacturing Programme, electronic goods have emerged as one of the fastest-growing sectors, with exports registering year-on-year growth of 49.4 per cent in FY23. Smartphones contribute a substantial part of these exports, as evident in the rapid spike in shipments of smartphones. As per the data from the India Cellular and Electronics Association, the total export value of India’s smartphone shipments during FY23 exceeded $10 billion, approximately twice that of the last year.</p>.<p>There has been impressive growth in engineering goods exports in recent years, mainly due to the Zero Duty Export Promotion Capital Goods Scheme. However, driven by a sharp fall in exports of iron and steel and an economic slowdown in key markets, the share of engineering goods exported declined in FY23. Initiatives to enhance the competitiveness of domestic manufacturing firms, such as the PLI scheme for automobiles and auto components and the National Programme on Advanced Chemistry Cell, FAME India II, among others, are expected to promote engineering goods exports.</p>.<p>India’s exports have become more technology-intensive over time, as witnessed by a rise in the share of technology-intensive commodities in overall exports. Until FY2004, labour-intensive commodities constituted nearly 40 per cent of the total manufactured exports. But their share has fallen consistently, and they accounted for roughly 20 per cent of the manufactured exports during FY05-FY23. In contrast, the share of capital-intensive commodities has gone up from around 31 per cent to 52 per cent during the same period.</p>.<p>In the years to come, positive developments in the manufacturing sector, driven by production capacity expansion, government policy support, heightened M&A activity, and PE/VC-led investment, are expected to create a robust pipeline to sustain economic growth. These factors will continue to play out during the course of this decade. India can achieve greater market and product diversification by entering into more FTAs with its trade partners and reviewing existing agreements to make them more favourable.</p>.<p><span class="italic">(Arora is deputy director and Chowdhry is consultant,<br />Ministry of Finance)</span></p>
<p>India’s merchandise exports have shown remarkable performance since the 1991 economic reforms. During the early phase of reforms, it took as many as nine years (FY92–FY2000) to double the exports; however, within the next 10 years (FY2000–FY2009), exports increased by nearly five times. The opening of trade has contributed to higher economic growth, as reflected in the rising value of the Trade Openness Indicator (ratio of merchandise trade to GDP). Liberalisation of trade through the removal of trade restrictions, elimination of exchange rate controls, export incentives, and rationalisation of tariff structure has contributed to a change in trade patterns and a shift towards non-traditional export markets.</p>.<p>The government’s emphasis on export diversification both across regions and products through the launch of the Focus Product Scheme and Focus Market Scheme has played<br />a key role in diversifying India’s exports to new markets.</p>.<p>The share of the top 10 countries in India’s merchandise exports registered a declining trend, falling from a high of 56.6 per cent in FY2000 to 46.8 per cent in FY23, signalling regional diversification of exports. Further, the Regional Herfindahl Index (an estimate of the concentration of exports across countries) for the top 10 countries decreased from 0.068 in FY2000 to 0.042 in FY23. Post-FY2000, Asian, African, and Middle Eastern nations, such as the UAE, Singapore, Hong Kong, and China, have replaced India’s traditional export partners, such as the UK, Germany, and Belgium. The share of Europe, which was around 40.9 per cent of India’s merchandise exports in FY92, fell to 19.2 per cent in FY15. However, the combined share of the developing regions—Asia and Africa—in India’s total exports rose from around 37.5 per cent in FY92 to 51.4 per cent in FY23.</p>.<p><strong>Also Read | <a href="https://www.deccanherald.com/business/business-news/india-s-export-share-in-world-trade-in-pharma-jewellery-footwear-dips-in-2022-gtri-1222099.html" target="_blank">India’s export share in world trade in pharma, jewellery, footwear dips in 2022: GTRI</a></strong></p>.<p>In terms of sectoral diversification, the share of petroleum and crude products in overall exports has increased considerably since FY2000, registering a CAGR of 7.3 per cent. Due to the availability of Russian cargo at a discounted price, India’s imports of petroleum products from Russia increased from 6.8 million tonnes in FY22 to 57.1 million tonnes in FY23, surpassing Iraq. This led to an increase in the share of petroleum products in total exports, which rose from 16 per cent in FY20 to 21.6 per cent in FY23.</p>.<p>Driven by the strong push given by the PLI scheme, along with measures like the Phased Manufacturing Programme, electronic goods have emerged as one of the fastest-growing sectors, with exports registering year-on-year growth of 49.4 per cent in FY23. Smartphones contribute a substantial part of these exports, as evident in the rapid spike in shipments of smartphones. As per the data from the India Cellular and Electronics Association, the total export value of India’s smartphone shipments during FY23 exceeded $10 billion, approximately twice that of the last year.</p>.<p>There has been impressive growth in engineering goods exports in recent years, mainly due to the Zero Duty Export Promotion Capital Goods Scheme. However, driven by a sharp fall in exports of iron and steel and an economic slowdown in key markets, the share of engineering goods exported declined in FY23. Initiatives to enhance the competitiveness of domestic manufacturing firms, such as the PLI scheme for automobiles and auto components and the National Programme on Advanced Chemistry Cell, FAME India II, among others, are expected to promote engineering goods exports.</p>.<p>India’s exports have become more technology-intensive over time, as witnessed by a rise in the share of technology-intensive commodities in overall exports. Until FY2004, labour-intensive commodities constituted nearly 40 per cent of the total manufactured exports. But their share has fallen consistently, and they accounted for roughly 20 per cent of the manufactured exports during FY05-FY23. In contrast, the share of capital-intensive commodities has gone up from around 31 per cent to 52 per cent during the same period.</p>.<p>In the years to come, positive developments in the manufacturing sector, driven by production capacity expansion, government policy support, heightened M&A activity, and PE/VC-led investment, are expected to create a robust pipeline to sustain economic growth. These factors will continue to play out during the course of this decade. India can achieve greater market and product diversification by entering into more FTAs with its trade partners and reviewing existing agreements to make them more favourable.</p>.<p><span class="italic">(Arora is deputy director and Chowdhry is consultant,<br />Ministry of Finance)</span></p>