India's export market expanding in volume, scope and range of products

Overall economic growth is driving up the volume and reach of India’s export market, both in terms of commodities and in terms of commercial services. According to a new report from global professional services firm KPMG, merchandise and commercial services exports in India have grown by 8% and 9% respectively over the last decade. 

The last few decades have seen the economy become increasingly globalised, and cross-border trade has been rapidly simplifying in tandem with the advancement in technology. According to Big Four professional services firm KPMG, this has been driven by an overall increase in the global GDP.

Over the last decade or so, the global export market for merchandise has grown at a compound annual growth rate (CAGR) of 3% from just over $12 trillion to nearly $16 trillion, while the export of commercial services globally has increased from nearly $3 trillion to $4.8 trillion, at a CAGR of 5%.

The Indian economy can safely be considered among the larger contributors to this growth, given the country’s exports are growing rapidly through a combination of economic growth and economic reforms. The country is expected to become the second largest economy in the world by 2050 according to some estimates.

In addition, one of the flagship policies under the current administration has been the ‘Make in India’ drive, emphasising the increase of domestic manufacturing to reduce imports and expand the export market, and the initiative appears to have produced tangible results in recent years.

Between 2006 and 2016, the market for India’s merchandise exports grew by a CAGR of 8% from nearly $122 billion to $264 billion, which also indicates how far the country has come since the host of liberalisation policies that were introduced in 1991, when total exports stood at $18 billion.

In 2017 itself, merchandise exports from India grew by as much as 3.8%. The export of commercial services, on the other hand, grew by 3.4% last year, and by a CAGR of 9% between 2006 and 2016 from just over $69 billion to just over $161 billion, driven by the overall growth of the country’s commercial services sector.

The report also notes that the geographical reach of India’s exports has become more expansive, with as many as 20 markets across the globe accounting for two-thirds of the total export value. Traditionally, India’s export destinations comprised only a handful of developed economies, the US being the primary market.

Although the US still accounts for the largest share of Indian exports, a number of other economies have entered the mix, including a number of developing countries. Among the larger markets, the UAE now accounts for 11% of Indian exports, while Hong Kong attracts nearly 4.5%.

The biggest jump in recent decades, however, has come in the exports across Asia and Africa. India is expected to become a driver of growth for Asia in the next few years. After liberalisation, between 1991 and 2015, Asia’s piece of the Indian exports pie has grown from 35% to a staggering 50%. African countries now attract 11% of India’s exports, a figure that stood at 3% back in 1991.

The Indian economy itself is diversifying beyond its heavy dependence on agriculture, which has brought about a shift in the nature of products exported by the country, from predominantly agricultural products and textiles, to incorporate engineered goods and value-added services in the technology segment.