Disappointing exports are a major obstacle to becoming a developed country.
By Manohar Manoj 
The Indian economy has been a story of a domestic-driven economy for a long time, in which the contribution of the external economy has never been more important. Now we have resolved to become a developed nation by 2047, there is an urgent need to contribute at least one-fourth of our GDP to exports. According to available data, India’s total exports during April-November 2024 were $ 536 billion, 7.5 percent more than $ 498 billion in the same period last year. Union Commerce Minister Piyush Goyal has estimated that the country’s total exports during the current financial year 2024-25 will be around $ 800 billion which is 7.5 percent more than $498 billion in this period last year. Even now, despite many measures to increase exports, our economy is not export model based but based on imported machinery and technology, Because of this our trade deficit is not less than one percent of the gross domestic product. In the past, it has gone up to 2 to 2.5 percent. If we look at the figures of last December month, our exports are 38 billion dollars and imports are 60 billion dollars. If we talk about the 1990s, at that time our share in total world trade was only half percent, which has now gone up to about one and a half to two percent, whereas if we talk about China, their share in world trade has increased from two percent in the 90s to about 15 percent now. One-third of the world’s total exports are made by China alone. Currently, China’s total export size of $4 trillion is the same as the size of India’s current economy.
It is true that despite the economies of many countries of the world being import-dependent, they have successfully achieved reasonable levels of progress. But every country needs to intelligently plan and strategize the advantages and disadvantages of its goods and services trade. Secondly, countries have to keep changing their strategy from time to time adopting different manufacturing technologies and also fulfilling the supply of changing patterns of demands. For example, India depends on imports for three-quarters of its petroleum products, including 85 percent crude oil and 44 percent natural gas, and also for its needs of fertilizers and metals. However, India acquired the capacity to process imported crude oil at a large scale and it became a major exporter of finished petroleum products. It was very helpful in bringing trade balance. Recently in the last December, there was a decline of 28 percent in the export of finished petroleum products. Similarly, India buys gold worth about 40 billion dollars every year, but instead of this, India has become a big exporter of polished gems and jewelry. These things helped in bringing trade balance. However according to recent figures, the export of gems and jewelry declined by 26 percent.
It would be noteworthy to say that ever since India started PLI i.e. Production Linked Incentive Scheme, the government’s incentive expenditure has increased, but it has been instrumental in making the country from an importer to an exporter of electronics products like mobile phone sets.
In India, the policy of import substitution and export promotion used to be a basic policy of the government during the past planning era of the economy. However, on items to items and segments to segments and as per the demand of new business trends and traditions, India has not been able to formulate an aggressive export strategy like our neighboring country China did. It is true that China started the liberalization of its external economy a decade earlier than us. Due to which, on one hand, a huge amount of foreign direct investment came there from big multinational companies and then it became successful in becoming a factory house for the whole world. China produced, priced and supplied goods and services according to the needs and purchasing power of different countries across the world. In this sequence, it took over the demands of many needs of the entire America and Europe. Because these countries felt that the cost of domestic production of these things was high and they had more benefit in getting supplied them from China. Similarly, India, which had an edge in international trade of items like textiles and handicrafts, was not able to take it forward in the last three decades, and countries like China and Bangladesh kept giving it tough competition in this matter. Further, India’s economy has been dependent on China for basic input goods related to pharmacy, computer hardware and electronics sectors. We were not able to substitute them quickly.
It is right that we have laid the foundation of many smart mobile and computer semiconductor and chip plants in our country, which will yield good results. In fact, due to the Indian economy being service-oriented, the predominance of the service sector has been seen even in international trade matters. In the merchandise sector, our imports are much higher than exports, whereas, in the case of services, our exports are much higher than imports. For example, during the April-November period of the year 2024, India was in a deficit of about $ 200 billion in merchandise trade, whereas in the services sector, India had a trade surplus of about $ 120 billion. This is the reason why India remains the largest remittance-earner country in the world. Bringing balance to merchandise and services trade should be a priority for India and its economy. This goal will be achieved only when the contribution of industry, especially the manufacturing sector, in our economy gets bigger.
International trade agreements and their conditions also play a big role in these matters. For example, India refused to participate in RCEP, the trade organization of Southeast Asian countries, at the last moment because due to this, there was more possibility of cheap Chinese products coming into India’s traditional domestic sector. After the new economic policy and joining the new regime of the World Trade Organization, India tried to bring a balance between competition and protection policy, but it could not succeed in making India a trade surplus country. Now the statements are being made in America, India’s largest export market country, regarding increasing tariffs under the new Trump regime. It would be a new challenge for India’s export market. The Government of India, along with improving the main infrastructure of international trade including the establishment and modernization of seaports and airports and inland connectivity, has announced several steps for fiscal and financial incentives to export. But the most important thing is the new initiative of the Indian government to make a country-specific trade strategy in the world. Under this, the Indian government has given a strategic direction to its commercial missions located in the twenty biggest trading partner countries of the world where 60 percent of its total exports are made. Under this, they have been told to identify every possible opportunity for Indian exports there and compete in every possible way with their competing trading countries.
Apart from this, Indian policymakers are seriously considering the strategy of free trade agreements with some Western countries of the world, in which the FTA agreement with UK has also got a lot of momentum. Many people are also calling it a game changer regarding India’s exports. Overall, exports are a major long-term challenge for the Indian economy to become a developed one.