External sector and India’s Trade

Mains Marks Booster     4th August 2023        
output themes
Status of the Export Sector in India
Trade Status
  • Jamnagar in Gujarat: The leading exporting district in India, contributing about 24% of India's exports in value terms in FY23 (till January).
  • Surat in Gujarat and Mumbai Suburban in Maharashtra rank second and third, accounting for only about 4.5% of the country's exports during the same period.
  • The remaining districts in the top 10 are Dakshina Kannada (Karnataka), Devbhumi Dwarka, Bharuch, and Kachchh (Gujarat), Mumbai (Maharashtra), Kancheepuram (Tamil Nadu), and Gautam Buddha Nagar (Uttar Pradesh).

Status of the Export Sector in India

Status of the Export Sector in India

Status of Trade

  • The merchandise trade deficit (the gap between exports and imports) increased by over 39% in 2022-23, reaching USD 266.78 billion, compared to USD 191 billion in 2021-22.
  • Merchandise imports rose by 16.51% in 2022-23, while merchandise exports grew by 6.03%.
  • However, the overall trade deficit stood at USD 122 billion in 2022-23, compared to USD 83.53 billion in 2022, benefiting from a trade surplus in services.

India’s Major Export Arenas

  • Engineering Goods: Exports in this sector experienced a remarkable growth of 50%, reaching USD 101 billion in FY22.
  • Agriculture Products: The government's efforts to meet global food demand during the pandemic have boosted agricultural exports. India's rice exports alone amount to USD 9.65 billion, the highest among agricultural commodities.
  • Textile and Apparels: In FY22, India's textile and apparel exports, including handicrafts, reached USD 44.4 billion, marking a significant 41% year-on-year increase.
  • Government schemes like the Mega Integrated Textile Region and Apparel (MITRA) Park are providing strong support to this sector.
  • Pharmaceuticals and Drugs: India ranks as the third-largest producer of medicines by volume and the largest supplier of generic drugs.
  • India supplies over 50% of Africa's generic drug needs, 40% of US generic demand, and 25% of UK medicines.

Challenges Related to Export Sector

  • Access to Finance: Obtaining affordable and timely finance is crucial for exporters.
  • Limited Diversification of Exports: India's export basket is concentrated in a few sectors, such as engineering goods, textiles, and pharmaceuticals, making it vulnerable to fluctuations in global demand and market risks.
  • Rising Protectionism and Deglobalisation: The Russia-Ukraine War and supply chain weaponization are reducing India's export capacity.

Way Forward

  1. Investment in Infrastructure
  • Enhancing export competitiveness requires improved infrastructure and logistics.
  • India should prioritize investments in transportation networks, ports, customs clearance processes, export promotion zones, and specialized manufacturing zones.
  1. Skill Development and Technology Adoption
  • Implement skill development programs to ensure the availability of skilled labour in export-oriented industries.
  • Incentivize and promote the adoption of technology, such as automation, digitization, and Industry 4.0 technologies, to boost productivity, competitiveness, and innovation in the export sector.
  1. Exploring Joint Development Programs
  • In the current wave of deglobalization and slowing growth, exports alone cannot be the sole engine of growth.
  • India can explore joint development programs with other countries in sectors like space, semiconductors, and solar energy to improve its medium-term growth prospects.