India has shown remarkable resistance to the obstacles created by the pandemic in global trade and has achieved new heights in terms of export in the financial year 2021-22. FY2021-22 proved to be a great one for Indian exporters after the country achieved its highest-ever merchandise exports. Riding on resurging global growth after two muted years of the Covid-19 pandemic, India surpassed US$ 400 billion in exports in FY2021-22, an all-time high for the country, comfortably higher than the five-year average of US$ 300 billion before coronavirus struck. According to the Ministry of Commerce and Industry, the exports stood at US$ 417 billion, which is roughly US$ 48 million every hour during FY21-22.
The Make in India initiative, launched in 2014, has played a pivotal role in facilitating investments and promoting innovation, which has resulted in driving overall development, thereby making India a major hub for the manufacturing, innovation, and design. The Foreign Direct Investment (FDI) policy under this initiative aims to drive growth and promote exports from India. Within the ambit of this policy, the central government has approved 100% FDI under an automatic route in many sectors in order to give a thrust to Indian exports.
As per the data released by the Department of Commerce and Industry, India’s exports buoyed by petroleum products, engineering goods, gems and jewellery, organic and inorganic chemicals and others rose to a record US$ 417 billion in FY2021-22. Elated by this achievement, the Minister of Commerce and Industry, expressed his intent of achieving US$ 1 trillion in merchandise exports by 2030.
Trends in India’s Exports
Since India opened its markets starting 1990-91, there has been an exponential rise in the country’s foreign trade exposure wherein the exports have increased more than 16 times and imports more than 19 times till now.
As per data from the Ministry of Commerce and Industry, merchandise exports from India reached a new high at US$ 417 billion during the financial year FY 2021-22, marking a surge of 43.18% over the US$ 291.18 billion recorded in the previous fiscal year (FY2020-21), and an increase of 33.33% over US$ 313.36 billion during FY 2019-20.
Source: Ministry of Commerce and Industry and Press Releases
The above figure gives an understanding of India’s export data year-wise from the financial year 2019-20 to the financial year 2021-22. Exports have witnessed tremendous growth over the last two years. India reached US$ 417 billion in manufacturing exports in FY2021-22 with rapid growth over the last 2 years. Presently India contributes 3.1% of the GDP, however, the export contribution to the world has been a mere 1.6%, and looking at the current opportunities, it has immense scope, and potential to grow.
In terms of India’s export forecast, it is expected that India will reach 1 trillion in manufacturing exports by 2030. The manufacturing’s share of GDP in India is estimated to increase from 15.6% to 21% by 2031.
Major Exports of India
Export trends in India show that the episodes of export growth accelerations are not new. India’s exports are characterized by a high rate of volatility making the growth path episodic with discrete shifts from periods of low growth to periods of high growth and vice versa. The switch between highs and lows is accompanied by dramatic changes in growth rates.
India’s exports benefited majorly from the surge in global growth after two years of repressed demand owing to the pandemic. Several PLI schemes in diverse sectors, such as mobile manufacturing, electronic and textile products, automobile, and auto components have boosted domestic manufacturing and exports by helping India gain competitiveness in the global markets. Though these incentives take a few years to show their full effect, early signs of their positive impact are already visible.
Source: Ministry of Commerce and Industry
Major sector-wise exports of India include:
The Road Ahead
In FY2021-22, the value of India’s merchandise exports touched US$ 417 billion, while services exports rose to US$ 250 billion. This was a milestone moment for India, as it was the first time wherein the export rate of India reached an all-time high. To sustain this growth and help India achieve the set target of US$ 1 trillion in merchandise and US$ 1 trillion in service exports by 2030, it is of utmost importance to develop strategies at both domestic and international levels.
Free trade agreements (FTAs) are crucial for the continued growth of Indian exports and these need to be further leveraged. The integration of India into global value chains (GVCs) plays a pivotal role here. GVCs offer the opportunity to engage with the most advantageous part of the value chain, instead of producing a completed product with a reduced average cost. This will facilitate greater economic growth, job creation, income generation, and tax revenue.
The Government of India has been proactive in creating a regulatory environment that fosters globally competitive firms. Several reform initiatives have been introduced which have been the key to enhancing the export potential of the Indian economy, these reformative initiatives include the introduction of the Production Linked Incentive scheme (PLIs), corporate tax rate cuts, simplification of labour laws, and increased focus on human capital.
For a holistic approach to boost exports, India’s state governments must also be proactive in creating the right business environment and facilities.