Growing Challenges on India’s Export Front
Kartavya Desk Staff
Syllabus: Economy
Source: EPW
Context: India’s merchandise exports face major challenges as the US imposed a 50% tariff on a substantial share of exports, threatening stagnation in its largest market (≈20% share). This comes at a time when India’s global export share has stagnated despite earlier gains.
About Growing Challenges on India’s Export Front:
Historical Trends in India’s Export Competitiveness:
• Early Gains (1990s–2010): Exports as a % of GDP rose from 7.1% in 1990 to 20.4% in 2010. Both merchandise and services contributed, supported by globalisation and reforms.
• Exports as a % of GDP rose from 7.1% in 1990 to 20.4% in 2010.
• Both merchandise and services contributed, supported by globalisation and reforms.
• Reversal and Stagnation (2010–2024): Share fell to 17.7% by 2020, recovering marginally to 21.2% in 2024, almost at 2016 levels. India’s global merchandise share rose from 0.51% (1990) to 1.81% (2024) — most gains front-loaded in the first two decades.
• Share fell to 17.7% by 2020, recovering marginally to 21.2% in 2024, almost at 2016 levels.
• India’s global merchandise share rose from 0.51% (1990) to 1.81% (2024) — most gains front-loaded in the first two decades.
• Sectoral Performance: Agriculture: rose from 0.85% (1990) → 2.22% (2024). Fuel & Mining: sharp jump, 0.32% → 2.62% (led by petroleum). Manufacturing: tripled to 1.73%, still lagging; textiles (5.77%), pharma (2.56%) and steel (2.64%) remain bright spots.
• Agriculture: rose from 0.85% (1990) → 2.22% (2024).
• Fuel & Mining: sharp jump, 0.32% → 2.62% (led by petroleum).
• Manufacturing: tripled to 1.73%, still lagging; textiles (5.77%), pharma (2.56%) and steel (2.64%) remain bright spots.
• Services Outperforming Goods: Share of global services exports: 2.9% (2010) → 4.2% (2024). IT-BPM, telecom, business services dominate; other services remain weak.
• Share of global services exports: 2.9% (2010) → 4.2% (2024).
• IT-BPM, telecom, business services dominate; other services remain weak.
Structural Challenges:
• Tariff Shock from US: 50% tariffs weaponise trade, undermining WTO norms. Will likely depress India’s most buoyant market, compounding global slowdown effects.
• 50% tariffs weaponise trade, undermining WTO norms.
• Will likely depress India’s most buoyant market, compounding global slowdown effects.
• Competitiveness Erosion: Declining merchandise share indicates structural inefficiencies. Rising costs, poor logistics, regulatory complexity constrain exports.
• Declining merchandise share indicates structural inefficiencies.
• Rising costs, poor logistics, regulatory complexity constrain exports.
• Over-Dependence on Services: Services exports share is double that of goods. Narrow base: IT/ITES dominate; construction, telecom and business services contribute ≈40%.
• Services exports share is double that of goods.
• Narrow base: IT/ITES dominate; construction, telecom and business services contribute ≈40%.
• Narrow Manufacturing Depth: Few competitive sub-sectors (textiles, pharma, steel, chemicals, telecom equipment). Most high-value industries (electronics, precision machinery, advanced materials) remain underrepresented.
• Few competitive sub-sectors (textiles, pharma, steel, chemicals, telecom equipment).
• Most high-value industries (electronics, precision machinery, advanced materials) remain underrepresented.
• Global Headwinds: Protectionism, tariff & non-tariff barriers, reshoring/nearshoring trends. WTO’s weakened dispute settlement reduces recourse for India.
• Protectionism, tariff & non-tariff barriers, reshoring/nearshoring trends.
• WTO’s weakened dispute settlement reduces recourse for India.
Initiative taken so far:
• Export Promotion Mission (EPM): Flagship 2025 initiative with sector-specific programs like Niryat Protsahan (easy credit for exporters) and Niryat Disha (market access, branding, logistics).
• RoDTEP Scheme: Refunds hidden central, state, and local taxes on exports; expanded in 2025 to cover steel, pharma, and chemicals, including DTA units.
• Simplified EPCG Scheme: Allows duty-free import of capital goods for export production; 2025 reforms eased compliance, deadlines, and fees for struggling sectors.
• BHARATI Initiative for Agri-Food Exports: APEDA’s 2025 program to incubate 100 agri-food startups, integrating AI quality checks and blockchain traceability for export readiness.
• E-Commerce Export Hubs: Creates hubs with warehousing, customs clearance, and logistics support; higher courier export threshold benefits MSMEs and small sellers.
Implications:
• Economic Growth: Export stagnation will drag GDP, already heavily reliant on domestic demand.
• Employment: Weak manufacturing exports stall job creation in labour-intensive industries (textiles, leather, light engineering).
• Balance of Payments: Rising import bills (energy, electronics) without robust exports threaten external stability.
• Geopolitical Leverage: Shrinking trade share weakens India’s bargaining power in global trade negotiations.
Way Forward:
• Strengthen Competitiveness of Manufacturing: Improve logistics (reduce cost from 13–14% of GDP to global benchmark 8%). Ease compliance, integrate into global value chains (GVCs). Focus on electronics, EVs, green tech, semiconductors.
• Improve logistics (reduce cost from 13–14% of GDP to global benchmark 8%).
• Ease compliance, integrate into global value chains (GVCs).
• Focus on electronics, EVs, green tech, semiconductors.
• Diversify Export Markets: Reduce dependence on US/EU by expanding to Africa, Latin America, ASEAN. Leverage FTAs (UAE, Australia, UK under negotiation).
• Reduce dependence on US/EU by expanding to Africa, Latin America, ASEAN.
• Leverage FTAs (UAE, Australia, UK under negotiation).
• Deepen Services Diversification: Beyond IT, strengthen healthcare, tourism, education, financial services, creative industries.
• Beyond IT, strengthen healthcare, tourism, education, financial services, creative industries.
• Policy & Institutional Support: WTO reform advocacy; parallel bilateral/multilateral pacts. Incentivise R&D, quality upgradation for MSME exporters.
• WTO reform advocacy; parallel bilateral/multilateral pacts.
• Incentivise R&D, quality upgradation for MSME exporters.
• Agriculture & Fuels: Enhance agro-processing exports, value addition in petrochemicals. Move from raw commodities to branded, processed products.
• Enhance agro-processing exports, value addition in petrochemicals.
• Move from raw commodities to branded, processed products.
Conclusion:
India’s exports face weak merchandise growth and falling global share, showing both external shocks and domestic competitiveness loss. Strengthening manufacturing, diversifying markets, and expanding services are key to regaining export momentum.