Export News

The Union Budget for FY26 will be announced at an opportune moment. With the budget being presented in less than two weeks after Trump resumes as the US president, it can serve as a tool to pacify the rhetoric against India’s alleged high tariff structure. Afterall, India has been a net gainer from flourishing north-south trade, particularly with the USA. India had embraced an export led growth model since the 1990s. It served well during an era when the rich northern economies were increasingly benefiting from the comparative advantage associated with labour intensive goods from poorer south. Powered by the 1991 reforms, India became a major participant in this North-South trade flows, and consequently witnessing a surge in low-skill manufacturing exports such as apparel, textiles, leather, and footwear, to compliment a surge in IT services exports. Globalisation helped usher in a new era in India’s growth and development and improved the standard of living with better access to basic necessities like health, education, and livelihoods. World Bank data suggests that India’s foreign trade as a percentage of its GDP rose from 11% during the 1960s to approximately 50% by the 2020s. India Budget: Time to upgrade India’s export strategy The second phase of a successful export led growth strategy demands the country to gradually transition from low skilled basic goods to more high precision merchandise. While India may have faltered in this phase multiple times in the past, a focussed policy approach over last 10 years has been instrumental in gradually overcoming the bottlenecks. Government sponsored skilling programmes, performance linked incentive schemes, expanding sea and airport infrastructures and international trade treaties are gradually helping India rise up the value chain in its manufactured goods basket. India’s commodities exports to the world have been shifting rapidly. For example, engineering goods now account for 24% of total exports, compared to 13% in FY01. Similarly transport equipment and electronics exports account for 6% and 7% respectively today (versus 2% in FY01). At the same time, share of textile (low skilled product) exports declined from 13% in FY01 to 4% in FY23, and so did agricultural product exports.