As per a report of the apex exporters body Federation of Indian Export Organisations (FIEO), India's labour-intensive export sectors such as apparels, marine products, plastics, and gems and jewellery are showing a “troubling pattern” as the country is experiencing a decline in global market share across these segments during the last five years. FIEO also said that a note of caution is needed regarding a distinct spike in export growth of around USD 40 billion as this increase is likely attributed to a rerouting of crude oil trade routes via India to Europe. It was further said that this phenomenon may not be sustainable in the coming years.
What is the most “pressing concern” about this negative export growth is the “poor” performance of labour-intensive sectors. In a country like India, these sectors hold immense significance not only for their job creation potential but also for their substantial contribution to net high-value addition.
The report said that a proactive approach that digs deep into the underlying reasons for the loss of market share is the need of the hour for addressing this challenge. A comprehensive analysis of the dynamics at play, ranging from maintaining the competitive advantage, reducing the production costs and increasing efficiency to quality and innovation could be the way forward.
Regarding the importance of promoting traditional sectors, FIEO said that the exports of mobile phones, which amounts to USD 10 billion, has a net value addition of about 1-2 billion. On the other hand, USD 10 billion worth of exports of traditional sectors would have a net value addition of more than 9 billion.
In the last five years, India is clearly experiencing a decline in global market share across labour-intensive sectors. Items like apparels, knitted garments, marine products, plastics, gems and jewellery sectors have showed a concerning pattern due to their growth rates ranging from 1-2 per cent. What is more troubling is that during the same period, global trade in knitted garments expanded by 6 per cent, whereas India’s growth rate remained at a meagre 2 per cent.
In woven garments, despite a global trade growth rate of about 2 per cent, India’s export growth has consistently been below 1 per cent for years, while Bangladesh and Vietnam growing at 6 per cent and 4 per cent, respectively, impacting India's share.
In the footwear sector, the global trade expanded by 5 per cent, but India’s exports have contracted. Over the last three years, Bangladesh’s growth rate has been more as compared to India’s, as per the report. Similar pattern can be seen in the pharmacy sector, where India’s growth has been at 9 per cent as against the global growth of 12 per cent in the past four years.
Further, it said that an analysis of technology-driven sectors indicates a significant surge in global demand for machinery, auto components, electrical and electronics goods. These sectors collectively contribute to about one-third of the global trade, amounting to more than 7 trillion. However, India’s current market share in these sectors stands at a mere 1 per cent. On the other hand, India’s imports are substantial, around USD 100-120 billion.
With regard to solutions, the report said that a more nuanced consideration is warranted in the labour-intensive sectors. Further, the report pointed out that on the basis of the export performances of the leading six competing countries (India, Bangladesh, China, Vietnam, South Korea, Malaysia and Indonesia) over the past six months (January-June 2023), it becomes evident that unfortunately both India and South Korea have consistently displayed a negative growth rate in their exports during this period.
In contrast, China, Malaysia, and Indonesia have shown positive growth rates in two out of the six months.
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