A blueprint for growing India’s exports to $2 trillion by 2030

Growth in Indian exports is visible in various products, ranging from machinery, health and wellness products, to food items, clothing, shoes, toys, etc.

Recently, the Boston Consulting Group (BCG), a global consulting firm, revealed in its research that between 2018 and 2022, India's exports to the US had increased by 44 percent, while China's had declined by 10 percent. Although US imports from Mexico and ASEAN countries have also increased, the important point is that Indian products are making inroads into US markets, replacing Chinese goods. This growth in Indian exports is visible in various products, ranging from machinery, health and wellness products, to food items, clothing, shoes, toys, etc. Walmart, the global retail chain, alone aims to buy goods worth $10 billion from India every year by 2027.

Since the beginning of this century, China has made inroads into world markets. It is noteworthy that China's total exports increased from just $253 billion in 2000, to $3,730 billion (or $3.73 trillion) by 2022. China's exports to India increased from just $1.47 billion in 2000 to $102 billion by 2022. During this period, China's exports to the US increased from $100 billion to $536.3 billion. India suffered huge losses due to increasing imports from China, as the contribution of manufacturing in our GDP declined from nearly 21.3 percent in 1995-96, to 16.3 percent by 2018-19. Similarly, manufacturing declined across the world, and China directly benefitted from the same.

Indian Manufacturing's Big Chance

Declining manufacturing gave rise to the problem of unemployment. Thus, the decline in China's exports to the US over the last four years, and the increase in India's exports to the country, is good news for Indian manufacturing, and indicates that Indian products have become more competitive than China’s.

It is true that the US has taken several measures to reduce imports from India and China, including raising import duties. It has not only withdrawn concessions like the General System of Preference (GSP), but has also increased the duties on imports from India. Under the WTO agreement, the US is the only country that can impose country-specific import duties.

But despite all such sanctions, a 44 percent increase in exports from India to the US is significant. BCG says this has happened because the landed cost of Indian goods is 15 percent lower than US goods, whereas the landed cost of Chinese goods is only 4 percent lower.

It has to be understood that while the US is also trying to promote manufacturing, despite that, the competitive strength of Indian products indicates the potential for expansion of the market for Indian goods all over the world, especially in developed countries.

India exported goods and services worth $770.2 billion in 2022-23. The new foreign trade policy announced by the government of India on March 31, 2023, set $2 trillion as the target for goods and services exports by 2030. This is being seen as a challenge, given that the pace of export growth in the last 10 years has been extremely slow. However, in 2022-23, exports jumped by 11.3 percent. If the growth rate can be taken to 14.81 percent, then exports  of $2 trillion by 2030 does not seem impossible.

How Will Exports Increase?

To increase exports, it is necessary that production and GDP increases. In 2013-14, India's GDP was $2 trillion. At that time, the country's total exports were a little less than $500 billion. In 2022-23, when India's GDP was $3.5 trillion, India's exports were $770.2 billion. And in 2030, when India's GDP becomes $7 trillion as targeted, then exports of $2 trillion would be conceivable.

India's agricultural exports had reached $50.3 billion in 2021-22, and $53.3 billion in 2022-23. Shortage of food in the world and surplus food in India indicates the potential in the expansion of food exports.

Today, domestic production fulfils 68 percent of India’s defence requirements. Defence exports, which were only Rs 1,521 crore in 2016-17, increased to Rs 15,920 crore by 2022-23, and considering the orders from the rest of the world, a large increase in defence exports can be expected in future. Exports of toys have grown 60 percent between 2018-19 and 2022-23.

Under the Aatmanirbhar Bharat campaign, production-linked incentives (PLIs) are being given to increase the production of various products, for which the country was excessively dependent on China, such as toys, solar panels, garments, machinery, defence equipment, electronics, telecom equipment, mobile phones, laptops, etc. Due to the increase in the production of these items, exports, especially of mobile phones, machinery, solar panels, electronics, and telecom, are increasing fast.

The PLI scheme has helped raise our competitiveness as well, as costs have reduced due to economies of scale, thanks to increasing production. At the same time, digitisation has helped reduce logistics costs. The cost of transportation is also coming down due to the construction of infrastructure like roads, domestic water transport, and sea ports. Further, labour costs in India are much lower than many countries, including China.

Although India’s GDP was $3.5 trillion in 2022-23 on the basis of the rupee-$ exchange rate, on the basis of purchasing power parity (PPP), our GDP was $13 trillion, i.e. almost four times more.

Therefore, there is a good possibility of increasing India’s exports, but for that continuous efforts would be required from industry and the government.

Ashwani Mahajan is a professor at PGDAV College, University of Delhi, and the national co-convener of the Swadeshi Jagran Manch.