How India’s key export items are losing edge

Exports are an important driver of economic growth and employment generation. It has played a pivotal role in transforming not only large economies like South Korea and China but also smaller island economies like Vietnam, Malaysia, and Singapore. India, however, has not been able to fully utilise this potential to its benefit.

The country’s export to GDP ratio touched an all-time low of 11.6% in 2017-18, the lowest in 14 years. In 2013-14 it had touched the peak of 16.4%. This is appalling when compared to countries like China, South Korea, Malaysia, and Vietnam, where exports to GDP stood at 19%, 37.3%, 69%, and 115% respectively.

Labour intensive exports

While Indian exports have rightfully been indicted of being commodity skewed, it is also equally labour intensive. More than 37% of India’s exports comes from four sectors, namely, textiles, gems & jewellery, leather and agriculture sector, which are all highly labour demanding. Irony is that despite years of discussions, this share remains exactly the same when compared to the situation a decade ago in 2008.

A cause of concern given that India is losing competitiveness in an area which remains its forte and at a time when it wants to augment its share in global exports which stands at less than 2%.

In the textile sector for example, India’s share globally increased from 3.5% to 4.7% during 2008 and 2017 – while in case of Vietnam it increased from 1.6% to 4.3% catching up with India, and China’s from 27.6% to 32.7%. In leather exports, while India’s share declined from 3.3% to 3.1% during same period, Vietnam’s increased by 4 times to touch 5.1%. Such figures do not augur well for the future of Indian exports. 

Policy interventions

The labour intensive sector in all likelihood will not disappear as it is a major source of job creation. What is important therefore is to address the structural issues that are plaguing it in order to boost their global competitiveness. For example, Chinese exporters take one-fourth the time to comply with border compliance requirements as compared to Indians. The last mile connectivity to ports and border posts do not match global standards and hence require slow movement of loaded vehicles. 

Having manufacturing clusters around coastal zones is a novel concept that has been doing rounds but efforts are needed so that it translates into reality sooner than later. While the SME definition is due for revision in Parliament, it is advisable to revisit it every five years.  

LOSING SHARE

• Labour intensive sector in all likelihood will not disappear as it is a major source of job creation
   
• India is losing its competitiveness and wants to augment its share in global exports which stands at less than 2%

The writer is economist with Exim Bank