Export Preferences List for India

In the last decade merchandise exports in India have experienced significant growth. The exports went down during the global economic meltdown of 2008 but have since performed well and it is expected that in 2012 this sector will see an increase of 30 percent.

In the preceding 10 years India’s exports have increased by more than 25 percent and the services sector has made a major contribution with regards to earning foreign exchange. The Special Economic Zones have contributed almost 30 percent of India’s exports.

India’s merchandise exports in the last decade and future prospects

In the period from 2004-05 to 2008-09 the exports sector has witnessed a CAGR of 22 percent compared to the period between 2000-01 and 2003-04 when the similar figure stood at 14%.

The rate went down after the 2008 global financial slowdown but from November 2009 onwards the trends have been positive. During April 2010 to February 2011 India exported goods worth 208.2 billion US dollars. This was a year-on-year growth of 31.4 percent.

The Ministry of Commerce and Industry is hopeful that India’s merchandise exports in the upcoming fiscal will be approximately 235 billion dollars, and the growth will be as per the recent trends.

The following table, which has been collected from data provided by Economic Survey 2010-11, shows India’s share, in percentage, in the global goods exports from 2000 to 2010:

The Economic Survey 2010-11 reveals that at present India is in the 21st position when it comes to leading merchandise exporters of the world.

India’s service exports in the last decade

Services are a major contributor to India’s foreign exchange earnings. In 2009-10 India earned 95.8 billion dollars in this sector and within 2000-01 and 2007-08 it experienced a CAGR of 28 percent, a testimony to its robust growth. India’s services export growth rate was commendable in 2010-11 as well.

From April to September 2010 this sector recorded a year on year growth of 27.4%. In the corresponding period in the previous fiscal the services sector had experienced a year on year loss of 16.8 percent.

The following table from the RBI and Economic Survey 2010-11 shows a comparative analysis of India’s merchandise and services exports in the last decade:

India’s SEZ exports in the last decade

Following the introduction of the SEZ Act (2005) and SEZ Rules (2006), this sector has experienced a high rate of growth. One of the major aims behind the introduction of the act was promotion of exports and the SEZs’ performance has helped achieve that target to a certain extent.

As of now 130 SEZs are operating in different parts of the country and these entities have been making significant contributions to India’s merchandise and services export growth.

In 2005-06 India’s SEZs contributed 5 percent to the aggregate exports and this went up to 29.7% during 2010-11. In the said period this sector witnessed a CAGR of 76 percent.

India exports – composition

India’s exports have been traditionally based on manufactured goods. However, in the last decade the share has reduced in excess of 10 percentage points – in 2003-04 this sector accounted for 76 percent but it came down to 65% in 2009-10.

In the composition of manufactured goods, engineering goods have been seen an increase in share while textiles, inclusive of readymade garments, has experienced a downfall.

The POL products have experienced a major increase when it comes to exports – in 2003-04 this sector had contributed 5.6 percent that went up to 15.7% in 2009-10. In April-August 2010-11 the exports have seen a year-on-year increase of 74.7 percent, agriculture and allied products’ share has gone up by 2.7%, and exports for manufactured goods have increased by 22.2%.

In the same period the exports of ores and minerals have increased from 3.7 to 4.9 percent. Software is the major contributor when it comes to services exports and accounts for almost 50% in this domain. From 2000-01 to 2007-08 services exports have had a CAGR of 30 percent.

Travel, transport and insurance including commercial services contribute almost 25% of the export earnings of the services sector. However, their share has come down from the 2000-01 figure of more than 30%.

Business services have also played a major role in India’s exports with a contribution of 12 percent during 2009-10. In April-September 2010-11 there has been a year-on-year increase of 15 percent in the software exports sector and 111% rise in business services exports. Travel and transportation sector has seen an increase of 26% in the same period.

India exports – major partners

Asian markets, with the exception of Middle East, are the biggest export partners of India accounting for almost 30 percent of the total figure. The Middle East is responsible for 20% of India’s aggregate exports. In Asia, Hong Kong and China together account for 10% of the exports and approximately 14% of export transactions are done with the UAE.

Europe accounts for almost 20 percent of India’s exports and the shares are evenly distributed among the various countries in this continent. The US accounts for at least 10% of goods and services exported by India.

India is yet to establish itself in the markets in Africa as is evident from its export statistic of 8 percent for the continent. Indian goods and services do not enjoy any significant demand in South America.

India exports and GDP growth

In January 2012 India’s exports amounted to 25347 million dollars and this amounted to 22 percent of the aggregate GDP for the period. Jewelry and gems were the major components and accounted for 16% of the aggregate exports.

Experts opine that India could leave China behind as the quickest growing economy in 2012. In the third quarter of 2010-11 fiscal India’s GDP grew at 8.2% on a year-on-year basis. This is much less than China’s corresponding figure of 10.4% but it is expected that several factors such as increasing exports, population, and services will help it perform better than China.

In 2006 Kamal Nath, during his term as the Union Minister of Commerce and Industry, had stated that India’s exports had played a major role in its GDP growth that has touched the 7-8 percent mark in the last couple of years. From 2003-2006 India’s exports have grown by 20 percent, on a consistent basis.

In the September quarter of the 2011-12 fiscal, India’s exports went up by 27.4 percent on a year on year basis. In the same period, imports increased by 10.9%. This meant that the sector was able to contribute 37.5 percent of the GDP growth in that particular period.

Future of Indian exports

India’s manufacturing sector is expected to account for a major part in the country’s export growth as per the McKinsey Report. In the last couple of years, the developed countries have been attempting to get products made from the LCCs (low cost countries) and India can be expected to make the most of this demand. It will be helped in a significant way by its skilled but inexpensive labor force.

The report further states that India’s manufacturing exports will go up to almost 300 billion dollars in 2015 from $40 billion in 2002. The export figure for 2015 is equivalent to almost 3.5% in global manufacturing trade at that point in time. The increase in manufacturing exports will also generate 25-30 million jobs in the said sector and this will contribute 1% to the yearly GDP growth rate.

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