Explained: What is driving India’s export surge

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NEW DELHI: With a whopping 73.51 per cent jump during first four months of financial year 2021-22, India’s merchandise exports have staged a good comeback from Covid-induced lows hit last year, a report by State Bank of India (SBI) economists showed.
Merchandise exports stood at $130.53 billion in April-July 2021 period as against $75.22 billion in same period last year. It also increased by 21.82 per cent from $107.15 billion registered in April-July 2019.

The report noted that growth in exports was mainly led by engineering goods, petroleum products, gems and jewellery, textile and garments, and organic and inorganic chemicals.

Petroleum products occupy largest share
Over the last 25 years, petroleum products have been the biggest contributor to India’s merchandise exports, with their share rising from 1.5 per cent in FY97 to around 21 per cent in FY13 and FY14.
However, their share reduced to 9 per cent in FY21 due to fall in crude oil prices and also due to the Covid-19 pandemic related lockdowns.
Movements in international crude oil prices play a major role in influencing India’s crude oil exports.
The report states that this year too, this dependence is visible as petroleum exports have been a major factor in the ongoing upwards trajectory of exports.

Compositional shift
Economists at SBI believe that the overall export basket composition has remained fairly stable in all these years as top 20 HS-2 categories have accounted for nearly 74 per cent to 80 per cent o total exports.

Whereas, agri-based products like residues and wastes from food industries, animal fodder, coffee, tea, mate and spices and labour intensive products like carpets and footwear have exited the top commodity export list.
Meanwhile, export of components like aluminium, ships, boats and floating structure exports have grown rapidly and are now part of top exports.
Some manufactured products like chemicals and pharmaceuticals, electrical and mechanical machinery and appliances, vehicles, articles of iron and steel, plastics have all grown fairly steadily and increased their share, the report noted.
At present, engineering goods have the highest share in exports at $35 million during April-July period, up by 70 per cent from last year.
However, no segment has grown as much as petroleum sector in the past few years.
Share of exports in India’s GDP
The report stated that in the last 25 years, the weighted contribution of exports to India’s real GDP growth has been in the range of -1.3 per cent to 4.8 per cent.
The years from 2003 to 2007 witnessed maximum contribution by exports.
But with slowdown in global growth, exports were impacted adversely and the weighted contribution turned negative.
The trajectory of global trade has been wobbly and for India the weighted contribution has been modest, and it again turned negative in FY20 and FY21.
But one positive observation that SBI economists noted was that despite the pandemic and rapid global slow down, the weighted contribution of exports to growth declined only by 0.9 per cent, as compared to the more than 1 per cent de-growth in previous slowdowns.
This gives hope that exports growth will see a positive momentum in the coming years, they said.
PLI schemes to boost exports
The government announced production linked incentive schemes (PLI) in order to make exports competitive.
Sectors covered by the scheme include advance chemistry cell (ACC) battery, electronic/ technology products, automobiles & auto components, pharmaceuticals drugs, telecom & networking products, textile products: MMF segment and technical textiles, food products, high efficiency solar PV modules, white goods (ACs & LED) and specialty steel.
All these sectors comprise huge potential for growth.

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