India’s export contribution to global trade could change with initiatives like production-linked incentives (PLIs) to encourage local manufacturing, and fresh investments that are pouring into the country’s core industrial sectors, said a report prepared by Bain & Company.
While India is the sixth largest manufacturing economy in the world, its export contribution to global trade is only 1.6 percent. India’s manufacturing exports for FY22 reached $418 billion, a growth of over 40 per cent compared to the $290 billion from the previous year.
Last year’s exports reflect a surge not just in comparison to the pandemic-hit FY21, but also the pre-pandemic peak of $328 billion in FY19, stated the report titled The Trillion-Dollar Manufacturing Exports Opportunity for India.
Manufacturing exports
Driven by growth in priority sectors and propelled by favourable megatrends in manufacturing, India is expected to scale up its manufacturing exports to $1 trillion by FY28.
Key manufacturing sectors like chemicals, pharmaceuticals, automotive, electronics, industrial machinery, and textiles—have shown tremendous growth over the past few years, according to the report.
In chemicals, Indian manufacturers are consistently building on cost advantage and strong supplier base, as compared to other manufacturing hubs, as well as strengths in research and development (R&D) capabilities, the report said.
In pharmaceuticals, India’s manufacturing cost is about 30-35 per cent lower than that of the US and Europe. In the automotive sector, several global companies are looking at export-oriented production in India because of the cost advantage over the US and Europe and strong manufacturing capabilities, the report said.
Between April and June this year, Indian car makers exported 127,115 vehicles, more than double the 43,619 units exported in the same quarter in FY21. In electronics, the manufacturers like Samsung, Wistron, and Foxconn are shifting production to India because of strong manufacturing and R&D capabilities, a growing supplier base, and policy support.