THE last few years have seen the rise of India as the region’s important economic power. Like many other developing countries, it is trying to use trade as a motor of development. This article looks into India’s foreign trade, particularly export, performance and pattern, during the last half decade.
Between 1999-2000 and 2003-2004, total merchandise exports and imports from India stood at $241.77 billion and $291.17 billion respectively. This makes the country’s average annual exports during last five years $48.35 billion and imports $58.23 billion. During 1999-2000, exports receipts of India were $36.82 billion, which increased to $63.84 billion in 2003-04 billion.
The import bill rose from $49.67 billion in 1999-2000 to $78.15 billion in 2003-2004. This means during last half-decade Indian exports and imports registered an increase of 73.38 per cent and 57.33 per cent respectively. Thus export growth has outpaced import growth by a considerable margin. Despite this, India is constantly facing trade deficit, which in 2003-04 surpassed $14 billion.
Ten products make up more than 84 per cent of total Indian exports. This shows that India lacks diversification in its export product portfolio. Of these 10 products only five—textile and clothing, gems and jewellery, engineering goods, chemicals and petroleum products—constitute more than 66 per cent of the total exports.
As in case of many other developing countries, textile is the mainstay of India’ exports, accounting for more than 21 per cent of the total export receipts. Now that quantitative trade restrictions or quotas on textile exports of developing countries into the markets of developed countries have been removed, India, after China, is being tipped to be the principal beneficiary of the new regime.
Therefore, the share of textile and clothing in the country’s exports is likely to go up substantially. Within textile and clothing, readymade garments, representing maximum value addition in that sector, is the largest sub-sector with a share of 52 per cent in total T&C exports.
Gems and jewellery with a percentage share of nearly 17 per cent, is the second largest export item it is followed by engineering goods, chemicals and petroleum products whose percentage share in total export earnings is 13.8, 9.59 and 4.85 respectively. The share of leather products is nearly four per cent, while that of ores and minerals is 3.3 per cent. Of agricultural products, marine products and rice are the main exports.
Importantly, India’s trade pattern is opposed to the world’s. Engineering goods make up 60 per cent of the global merchandise trade, while the share of textile and clothing is less than six per cent. In case of India however the share of engineering goods in total exports is less than 14 per cent, while that of textile exceeds 21 per cent.
From product portfolio, we move to market portfolio. More than 64 per cent of Indian exports are destined for four regions only—the EU, North America, Middle East and Asean region. Region wise, the EU and North America are India’s largest export markets. Together they account for 43.5 per cent of the total exports. The share of the EU in total Indian exports exceeds 22 per cent, while that of North America is in excess of 21 per cent. Within the EU, the combined share of three countries—the UK, Germany and Belgium—is in excess of 54 per cent. And in North America, the USA accounts for 94 per cent of Indian exports to that region.
The Middle East is the next important export market with a percentage share of about 13 per cent. The UAE is the most important market in the Middle East region accounting for 46 per cent of the total exports to that region followed by Saudi Arabia, whose share is 13 per cent.
Interestingly, Israel is also an important Indian export market in Middle East, making up nearly nine per cent of the country’s exports to that region. The Asean region and China (including Hong Kong) each make up more than eight per cent of global Indian exports.
Among Asean countries, Singapore is the largest market for Indian exports. The African continent accounts for 6.26 per cent of India’s global exports with Egypt and Nigeria as the most important markets. The share of the Saarc region in the country’s total exports is just five per cent.
Bangladesh and Sri Lanka are India’s biggest export markets in the region. For obvious reasons, the share of Pakistan in global exports of India is merely o.39 per cent.
Country wise, the USA is India’s largest export market, which accounts for more than 20 per cent of its total exports. Next on the list are the UAE and Hong Kong. With the exception of Japan and China, the remaining top 10 export markets of India are the member countries of the EU—the UK, Germany, Belgium, Italy, and France. The share of top 10 countries in Indian’s world exports is slightly above 54 per cent. This means that market- wise India has a wider export base than product- wise.
It may be a useful exercise to briefly compare India’s export pattern with that of Pakistan. Both India and Pakistan have a narrow export product portfolio, though Pakistan’s is narrower. In case of Pakistan, top 10 products constitute 90 per cent of total products, while in case of India, the figure is 84-85 per cent.
For both countries, textile and clothing is the single largest export item. However, in case of Pakistan the share of T&C in total exports is 65 per cent—almost three times larger than that in case of India. Thus it is evident that Pakistan has higher stakes in post quota textile trade than India.
Engineering goods, the most heavily traded item in the world, have the third largest share in Indian exports, while in case of Pakistan they are not included among top 10 exports. Similarly, gems and jewellery, which make up nearly 17 per cent of Indian exports, have a minor share in Pakistan’s exports.
Leather and agricultural products like rice have a much larger share in Pakistan’s total exports than in case of India. Conversely, chemicals and petroleum products have a much larger share in Indian exports than in Pakistan’s.
Region- wise top four export markets of both Pakistan and India are the same—the EU, North America, Middle East and China (including Hong Kong). The Saarc region makes up a small market for both countries. Country wise, the USA is the single largest importer in case of Pakistan as well as India followed by the UAE. However, as in case of product portfolio, Pakistan has a narrower market portfolio than its eastern neighbour.
Despite fast growth during last five years, India’s share in global merchandise exports is only 0.8 per cent. Certainly the abolition of textile quotas will help increase that share. But, as mentioned in a preceding paragraph, textile trade makes up only a small part of global merchandise trade. Therefore, India needs to do much more to raise its export level.
The country has a narrow export base in terms of both products and markets. It needs to be broadened. At present India is ranked at 56 in terms of global competitiveness, which is based on three indicators: macro- economic environment, technology and public institutions. The country needs to improve on these indicators to increase its competitiveness, which holds the key to increasing its exports.
THE last few years have seen the rise of India as the region’s important economic power. Like many other developing countries, it is trying to use trade as a motor of development. This article looks into India’s foreign trade, particularly export, performance and pattern, during the last half decade.
