India’s Share of World Merchandise Exports at Record High: Report | Photo credit: iStock Images
India is gaining shares in manufactured exports and the share of global merchandise exports is now at an all time high, Credit Suisse said in a report.
Gains in raw materials may not last, but momentum should persist in electronics (large market size, opportunities for share gains, political support) and specialty chemicals (a decade of steady growth has enabled companies to gain momentum).
In textiles, exports are increasing after a decade of stagnation, currently mainly in upstream yarns / fabrics, but clothing order books are also strengthening.
The opportunity in the automotive sector is as much local (strong growth in demand gives momentum) as it is potential share gains as the global industry disrupts (new OEMs, business models and supply chains), according to the report.
The share of India’s manufacturing industry in GDP has declined steadily since 2012, in part due to stagnant exports of manufactured goods. As exports pick up, either because of the impact of the PLI regimes or otherwise, they could increase GDP by 2.4 percent in five years. The boost to employment would be concentrated in electronics and clothing.
Electronics is very promising, not only because of its large size (30% of world exports of goods), but also the opportunities for market share gains, given geopolitical changes and shrinking manpower. industrial work of China. Aided by political support, a critical mass appears to be building, with local and global companies investing in capacity in India (even those not benefiting from LIP programs).
In chemicals, while India does not have a lasting advantage in bulk, its share of world exports of specialty chemicals has increased steadily (these now account for over 10% of India’s exports). Thanks to steady growth and, in some cases, loss of market share by China, the industry has now acquired critical mass.
India saw gains in electronics, chemicals, automobiles and clothing, according to the report. India has a structural deficit in sectors dependent on the availability of resources, such as oil, gas, coal and gold (together about a fifth of world exports); agriculture’s share is above average given structural advantages, but its share in manufactured exports is lower.
In manufactures, India’s share before Covid-19 was above average in jewelry (although with low added value) and textiles, and below average in electronics.
Since 2015, metals have experienced the fastest growth, but these may not hold up (global commodity cycles). Growth in electronics and machinery has been well above average, although chemicals and textiles (including clothing) contributed the most in absolute terms given their size.
While electricity and equipment together account for $ 600 billion in global exports per year, India’s opportunity would lie primarily in the initially labor-intensive segments; scale could eventually lead to upstream integration.
To expand and consolidate these share gains, you have to see testimonials from Indian groups investing in the value chain (such as Tata Electronics, which has already invested $ 1 billion in its Hosur plant and plans to hire 40,000 workers. ), as well as foreign tech companies setting up in India. Elsewhere, in consumer electronics like air conditioners, import substitution has resulted in significant growth in manufacturing, Credit Suisse said.
India’s textiles and clothing exports have picked up over the past year, as after a period of lockdowns dampening demand for new clothing, global clothing markets have rebounded. However, while exports of $ 12 million surpassed the $ 35 billion level at which they were stranded for much of the past decade, growth, at least until November-2021, was in yarns and threads. upstream fabrics, and downstream clothing exports were lower than the previous peak. in May-2019.
It could simply be a time lag in demand flowing through a value chain, and preliminary data for December-2021 shows a significant recovery in clothing exports. However, there may also be another factor: India does not have the conventional advantages that Bangladesh and Vietnam have. In addition, the U.S. ban on cotton in Xinjiang from December 2021 could help upstream businesses in India move forward, the report said.
China is unlikely to give up its entire clothing market share (ready-to-wear, or RMG), but the trends of the past decade are expected to persist.
While almost all of China’s share in cotton clothing has been taken by Bangladesh and Cambodia, and that in man-made fibers by Vietnam, current industry comments suggest that volumes are also starting to decline. move to India.