India’s export strategy – to do a China
April 26, 2011

After China pulled an India last week, its India’s turn to pull a China this week. Led by Manmohan Singh, the man who liberalized  the Indian economy in the early 1990’s, India is revving up and diversifying her exports. India’s exports surpassed all targets in 2010-11 and grew 37.5 percent to US$245.9 million. It is further expected to grow at an average of 25 percent over the next few years and easily surpass US$300 billion in 2011-12. An emboldened government has further set an export target of US$450 billion for 2013-14, doubling current exports. India’s entry into new markets and robust performance in engineering goods, gems and jewellery and textiles segments are the reason behind the growth spurt. The strong growth was driven by higher exports to new markets in Latin America, Africa and Asia.

Minister of State for Commerce and Industry Jyotiraditya Scindia, further expects trade ties between India and Malaysia, Thailand, Philippines, Indonesia, Taiwan and South Korea in Asia, Egypt and South Africa in the African continent and Argentina, Brazil, Chile, Colombia, Mexico and Uruguay in South America to improve substantially.

Following the Blue Ocean Strategy, India sees a high potential for diversifying its exports as the world will be in greater demand for raw materials, which is one of its primary exports. Markets such as Brazil, Venezuela and Argentina are expected to open up significantly to Indian exports as their hunger for raw materials grows and China according to its 12th Five-Year Plan for 2012-16 focuses more on domestic growth.

“Engineering goods by far constituted the largest component of our exports entailing considerable domestic value addition, followed by petroleum products, gems and jewellery, ready-made garments and pharma goods,” commerce minister Anand Sharma said. India’s engineering exports registered the highest ever growth of about 85 percent to US$ 60.1 billion in 2010-11, on account of a robust demand for the goods not only from major markets like the US, but also from Latin America.

As a precursor to enlarging and diversifying the exported basket of commodities, factories in India are increasing productivity, reducing cost and moving up the value chain which is now yielding dividends. Also India has signed several Free Trade Agreements including that with South Korea, Malaysia and Japan. Similar trade pacts are being planned for ASEAN, Taiwan, the European Union, Israel, Australia, Indonesia and New Zealand.

During the recently announced annual Budget, New Delhi also made changes to reduce red tapism and give exporters and importers more control. The government announced incentives for shipments to 41 markets, most of which were new trading destinations for the country. Exports to Latin America were up 74 percent in the first three quarters of 2010-11 compared with the year-ago numbers while those to African countries jumped 50 percent.

Exports to the EU and US—traditional markets for Indian merchandise—grew a more modest 22.6 percent and 26.4 percent, respectively. “Most of the growth has come from new markets in Latin America, Africa and also Asia, which has now emerged as the main market for India’s exports,” said Ajay Sahai, director-general of the Federation of Indian Export Organisations. The thrust on new markets is likely to continue in the export strategy to be announced by the commerce ministry later this month, which will aim at increasing the country’s exports to US$450 billion over the next three years.

Exports to the EU and US—traditional markets for Indian merchandise—grew a more modest 22.6 percent and 26.4 percent, respectively. “Most of the growth has come from new markets in Latin America, Africa and also Asia, which has now emerged as the main market for India’s exports,” said Ajay Sahai, director-general of the Federation of Indian Export Organisations. The thrust on new markets is likely to continue in the export strategy to be announced by the commerce ministry later this month, which will aim at increasing the country’s exports to $450 billion over the next three years.

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