Growing popularity of India's exports

We have to understand that although our GDP in 2022-23, on the basis of Rupee-US dollar exchange rate was 3.5 trillion dollars, but on the basis of purchasing power parity our GDP was 13 trillion dollars, i.e. almost 4 times more. This means that the Indian Rupee, on purchasing power parity (PPP), is worth about 4 times the market price of the Dollar. This means our production costs can be further lowered. — Dr. Ashwani Mahajan

Recently, a global consulting firm, Boston Consulting Group (BCG), has revealed in its research that between 2018 and 2022, India's exports to USA have increased by 44 percent, while China's exports to US have declined by 10 percent. Although US imports from Mexico and ASEAN countries have also increased, the important point is that Indian products are definitely making inroads into the US markets, replacing Chinese products. This growth in Indian exports is visible in various products ranging from machinery to food items, health and wellness products, clothing, shoes, toys etc. Global retail chain, Walmart alone aims to buy goods worth $10 billion from India every year by 2027.

Since the beginning of this century, China has continuously made inroads into the world markets. It is noteworthy that China's total exports to the world had increased from just 253 billion US dollars in the year 2000 to 3730 billion US dollars by the year 2022. China's exports to India alone increased from just $1.47 billion in 2000 to $102 billion by 2022. During this period, China's exports to US increased from $100 billion to reach $536.3 billion. India suffered huge losses due to increasing imports from China and the contribution of manufacturing in our total GDP declined from nearly 21.3 percent in the year 1995-96 to 16.3 percent by the year 2018-19. Similarly, manufacturing declined across the world and China directly benefited from the same.

Declining manufacturing gave rise to the problem of unemployment in the rest of the world. The decline in China's exports to the US, over the last four years and the increase in India's exports to the US, is a good news for Indian manufacturing. This is indicative of the fact that Indian products have become more competitive than China. It is true that the US government has taken several measures to reduce imports from India and China, including raising of import duties. In order to reduce imports from India, the US government has not only withdrawn the concessions, namely, General System of Preference (GSP), given earlier, but has also increased the import duties on imports from India. It is noteworthy that under the WTO agreement, US is the only country that can impose country specific import duties.

But despite all US sanctions, 44 percent increase in exports from India to the US, assumes significance. Boston Consulting Group (BSG) says that this has happened because landed cost of Indian goods is 15 percent lower as compared to US goods, whereas landed cost of Chinese goods is only 4 percent lower than US goods. That is why the American market gives priority to Indian goods over Chinese goods. It has to be understood that while US is also trying to promote manufacturing, despite this, the tremendous competitive strength of Indian products indicates at the chances of expansion of the market for Indian goods all over the world, especially in developed countries. It is well known that cost competitiveness plays a major role in today's world.

Export target of $2 trillion

The new foreign trade policy was announced by the Government of India on March 31, 2023. In this policy, the target of export of total goods and services from India by the year 2030 has been set at $2 trillion i.e. 2000 billion dollars. It is noteworthy that India's total goods and services exports in the year 2022-23 were $770.2 billion, increasing these exports to 2000 billion dollars by the year 2030 is being seen as a big challenge. While the pace of export growth in the last 10 years has been extremely slow, the challenge appears even greater. But last year in 2022-23, exports of goods and services have increased by 11.3 percent. Therefore, if this growth rate is taken to 14.81 percent, then it does not seem impossible to reach the target of exports of 2000 billion dollars by the year 2030.

How will exports from the country increase?

First of all, to increase exports, it is necessary that production and GDP in the country increases. It is noteworthy that in 2013-14, India's total GDP was equivalent to 2 trillion dollars i.e. $2000 billion. At that time the country's total exports were a little less than $500 billion. In 2022-23, when India's GDP was 3.5 trillion dollars, India's exports were 770.2 billion dollars and in 2030, when India's GDP becomes 7 trillion dollars as per the target, then it will not be impossible for the country's total exports to be 2 trillion dollars.

India's agricultural exports had reached $50.3 billion in 2021-22. These exports reached $53.3 billion in 2022-23. Shortage of food products in the world and surplus of food products in India point towards scope in food exports from the country. In the last one or two years, India has established itself as saviour of many countries of the world, from hunger, by exporting food products.

Today, India fulfils 68 percent of its defense requirements from within the country. Not only this, our defense exports were only Rs 1521 crore in 2016-17, which have increased to Rs 15920 crore by 2022-23. Given orders from rest of the world, a large increase in defense exports is expected in the future.

Exports of toys have registered a growth of 60 percent between 2018-19 and 2022-23. It is noteworthy that under Aatmnirbhar Bharat campaign, production linked incentives (PLIs) are being given to increase the production of various types of products, for which country was excessively depended on China, which included toys, solar panels, garments, machinery products, defense equipment, electronics, telecom, mobile phones and laptops etc. Due to increase in production of all these items, exports, especially of mobile phones, machinery, solar panels, electronics goods and telecom etc. are increasing fast.

It is clear from the Boston Consulting Group’s research that Indian exports to US have increased and retail chains like Walmart are also shifting towards India. All this is happening due to the competitiveness of our products. PLI scheme has not only contributed in increasing the competitiveness, the cost is also getting reduced due to economies of scale, thanks to increasing production capacity in the country. At the same time, digitalization has a special contribution in reducing the logistics cost in the country. Not only this, the cost of freight and transportation is also coming down due to the construction of various types of infrastructure including roads, domestic water transport and sea ports in the country. It is well established that the labor cost in India is much lower than many countries including China.

We have to understand that although our GDP in 2022-23, on the basis of Rupee-US dollar exchange rate was 3.5 trillion dollars, but on the basis of purchasing power parity our GDP was 13 trillion dollars, i.e. almost 4 times more. This means that the Indian Rupee, on purchasing power parity (PPP), is worth about 4 times the market price of the Dollar. This means our production costs can be further lowered. Therefore, there is good possibility of increasing exports from India but for this continuous efforts would be required from industry, governments and the society.            

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