India is one of the fastest-growing economies in the world, and its export competitiveness has played a significant role in its growth.
Top Indian exports for India, including oil and petroleum gases, scaled to new heights, growing at 13.84% during FY 2022-23.Source: pib.gov.in
So, what’s the reason behind the surging export competitiveness of India? This article will analyze the factors contributing to India’s export competitiveness and the rise in top Indian exports.
Understanding the Indian Export Landscape
India is a diverse country with a wide range of exports which includes exports of natural resources. jewelry, chemicals, and more.
According to the World Bank, Top India Exports in 2020 were:
- Mineral fuels, including oil: 13.2% of total exports
- Gems, precious metals, and coins: 9.9% of total exports
- Machinery, including computers: 7.7% of total exports
- Organic chemicals: 4.7% of total exports
- Vehicles: 4.5% of total exports
Know About India’s Export Competitiveness and
the factors to consider for success
These commodities alone account for over 40% of India’s total exports.
One of the unicorn commodities for which India has seen massive export traction is oil and gas. In FY 2022, India’s natural gas production stood at 33,131.23 Million Metric Standard Cubic Meters (MMSCM), gradually growing in FY 2022.Source: globalnewswire.com
Natural gas consumption is expected to grow, registering an average annual growth of 9% until 2024, making oil and gas one of the top Indian exports. However, if you are wondering what Is India’s comparative advantage in global competition? The answer is much layered and has several aspects.
What Is India’s Comparative Advantage In Global Competition?
India’s comparative advantage lies in its large domestic market, low-cost labor, and higher availability of natural resources reducing the raw material cost.
Low labor cost
Low labor cost benefits top Indian exports by reducing the total operational expense. According to Global Data, the country’s labor cost index stood at 155 in 2021, indicating relatively lower labor expenses.
The availability of a large and skilled workforce in India attracts businesses with more options for their manufacturing projects. This abundant labor supply helps keep wages relatively lower compared to other countries.
The minimum wage in India is $95, which is quite low compared to $1550 in the US, making it an ideal place to invest in manufacturing setup.Source: visualcapitalist.com
India’s domestic market
India’s large domestic market significantly contributes to its export competitiveness, boosting businesses through regular cash flows. The domestic market provides a platform for companies to test their products and services before exporting them.
Apart from the benefit of testing their products, businesses also get a reliable source of capital to invest in improving exports. The domestic market also provides economies of scale, which help companies to produce goods at a lower cost.
Due to better economies of scale, a larger domestic market, and a better testing environment, top Indian exports get a competitive edge.
Natural resources of India
India has substantial reserves of coal and other energy resources, making it self-sufficient. This enables manufacturing industries to have a stable and reliable power source, reducing the dependency on expensive imports.
Apart from the natural resource, government policies have helped top Indian exports to grow higher with a focus on not just coal and hydropower plants but also leveraging alternate resources like solar energy.
India is one of the largest trading partners of the United States. According to a report by US Census Bureau, the India-US trade deficit was more than $33 billion in 2021.
The exports from India were way ahead of the imports from the US, which means the export competitiveness is better. Above India, US trade Statistics also indicate the dominance of top Indian exports.
India’s Manufacturing Growth
India’s manufacturing sector has several advantages over manufacturing industries in other countries like US and Canada.
Currently, India accounts for 3% of the total manufacturing in the world, ranked 6th in terms of output. Other countries in the top 6 manufacturing output rankings are Germany, Japan, the US, and South Korea.Source: brookings.edu
All these countries have higher minimum wages compared to India, making the country the best choice for manufacturing companies.
Key Takeaways From India’s Export Growth Story
India’s economic growth is due to its favorable government policies, diversified exports, low labor cost, natural resources, and domestic market excellence. Its manufacturing sector is also rising.
What makes this growth story significant is the end of dominance for other countries and the rise of top Indian exports worldwide. India’s export competitiveness and manufacturing growth will continue to drive its economic growth. However, if you are a manufacturing company looking to leverage India’s export competitiveness, you need a trusted manufacturing partner.
The ones that know local manufacturing norms and culture and maximize gains. This is where a strategic manufacturing service from Zetwerk can help you. So, start your manufacturing journey in India by leveraging Zetwerk’s expertise.
India’s export competitiveness has been driven by factors such as its large domestic market, low-cost labor, abundant natural resources, favorable government policies, and diversified export portfolio. These elements collectively contribute to India’s ability to compete globally and achieve consistent export growth.
India’s top exports include mineral fuels (oil and petroleum gases), gems, precious metals, machinery (including computers), organic chemicals, and vehicles. These commodities collectively comprise a significant portion of India’s total exports and have played a vital role in the country’s economic expansion.
India’s large domestic market serves as a testing ground for products and services before they are exported. This allows businesses to refine their offerings based on local preferences and demands. The regular cash flows from the domestic market also provide capital for investing in export improvements and contribute to economies of scale.
India’s low-cost labor is a major advantage for its export competitiveness. The country’s labor cost index is relatively lower than many other nations. The availability of a skilled workforce and lower wages attracts manufacturing projects, leading to reduced operational expenses and increased export competitiveness.
India’s substantial reserves of natural resources, including coal and energy, make it self-sufficient and reduce dependency on expensive imports. The stable and reliable power source from domestic resources supports manufacturing industries and contributes to export growth.