India's Export Revolution: Untapped Potential in a Growing Economy

India, now the world's fifth-largest economy, faces challenges in labor productivity and high-tech infrastructure, inhibiting its full export potential. Despite progress in diverse sectors and favorable trade policies, the country ranks 8th in merchandise exports globally. A transformation in manufacturing points to future export growth amid global uncertainties.

India has emerged as the fifth-largest economy globally but still struggles to fully capitalise on its export potential, according to a report by Ionic Wealth by Angel One. Key issues such as low labor productivity and inadequate high-tech infrastructure are identified as major hurdles hampering the nation's global trade performance.

Although India's share in global GDP rose markedly from 1.6% in 2000 to 3.5% in 2023, the country's merchandise exports position remains relatively low at eighth globally. This persists despite a weakening rupee, a factor traditionally seen as supportive of export growth, suggesting systemic bottlenecks.

However, the report highlights promising trends that could enhance India's trade outlook despite global challenges. There's significant momentum in emerging industries like electric vehicles, electronics, semiconductors, and green energy. Also notable is the surge in foreign direct investment and the increasing presence of multinationals, suggesting a shift towards actual production in India rather than merely promotional campaigns.

In a move to diversify exports, India has recorded robust growth in sectors such as electronics, pharmaceuticals, automotive, and food processing, driven by Free Trade Agreements and bilateral negotiations. The country benefits from holding tariff advantages over competitors like China and Vietnam amid global tariff disputes.

India's manufacturing sector remains robust, with its Purchasing Managers' Index leading among key Asian economies, signaling strong momentum. The Reserve Bank of India's recent survey demonstrates positive business sentiment across manufacturing metrics, further highlighting India's export potential.

While challenges remain in labor productivity and infrastructure, the country's strategic investments, policy support, and positive business climate are paving the way for significant export growth in the coming years.

(With inputs from agencies.)