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I. Introduction
India, one of Asia’s most promising candidates for transformative industrialization over the coming few decades, stands at a critical juncture in its development trajectory. In the status quo, India’s GDP at current prices is estimated to have grown by 8.2% to $3.94 trillion in FY ‘24. Aspiring to become a developed economy by 2047, India seeks to grow tenfold to a $30 trillion economy with a per capita income of $18,000 per annum. According to government estimates, the country will have to record sustained growth in the range of 7-10% for the next three decades to achieve this transition from a middle-income to a high-income status. To achieve this growth, an impending debate in the Indian context has been regarding the orientation of its industrial policy towards export-led growth versus an import substitution to foster growth.
Set in the global context of intense global strategic competition and conflict, this debate seeks prominence under two perceived notions of the domestic and international economic outlook. Firstly, advanced nations are increasingly turning to industrial policy, motivated by security concerns and a less-than-ideal approach to energy transition that lacks a carbon pricing mechanism. This shift has sparked a surge in trade interventions, industrial policies, and subsidies, heightening the risk to the global economy due to the widespread departure from established international trade rules. This has enabled a widespread notion that emerging economies should adopt inward-looking import-substitution strategies due to a less favorable global market growth outlook. Secondly, in the Indian context, there has been an increasing trade de cit. In FY ‘24 19.7% was contributed through exports at $776.68 billion and 21.6% was contributed through imports at $854.80 billion. Given the large volume of imports, the policy and intellectual circle make a compelling case that the large volumes of import of many products testify to domestic demand for them justifying the need for import substitution.
As argued by several academic and policy experts, the inward-looking approach towards domestic markets is based on the misconception that given its size, India has the unique ability to grow by focusing on its large domestic market. However, it is counter-intuitively not true as a country’s market size is not being targeted by any one business or economic activity, but by all business and economic activities. By this virtue, India’s market size is one of the smallest, amongst the bottom one-fourth of all economies when viewed from the angle of GDP per capita which stands at $2.73 thousand alongside smaller economies like Bangladesh. Thus, this paper argues that India must adopt export dynamism for the growth of Indian states. To this end, this paper is structured as follows: first, with a review of analyzing the existing arguments for import substitution, an argument for export orientation as the path forward will be put forth; second, the current export scenario of India will be delineated; third, an analysis on the potential bottlenecks and challenges in India’s export growth will be expounded; fourth, through regional and historical benchmarking, the best global practices of export growth will be identified; lastly, recommendations for India’s growth will be provided.
II. India’s Trade Trends
Shifting Trends
Since the 1991 reforms, India's trade landscape has undergone significant changes, especially over the past decade, as the country has navigated major global economic shifts, including the COVID-19 pandemic and Russia's full-scale invasion of Ukraine in early 2022. Currently, two discernible trends can be noticed:
1. India's exports have risen, with merchandise exports growing from $314 billion in FY14 to $451 billion in FY23, achieving an average annual growth rate of 5%. Petroleum products have been a key driver of this export growth, accounting for over 21% of exports in FY 23, supported by high crude oil prices and strong global energy demand, partly due to supply chain disruptions from various conflicts. Additionally, industries like electronics, telecom instruments and aluminum products have shown robust export growth over the past decade.
2. Imports, however, have grown at an even faster rate. Over the last decade, Indian imports have increased by 7% annually, from $450 billion in 2013-14 to $716 billion in 2022-23. This import surge has widened the country's trade deficit in merchandise to $265 billion in 2022-23, up from $136 billion a decade earlier. The current account deficit now stands at nearly 2% of GDP. It's worth noting that the current account includes the trade of goods and services and primary and secondary income. India enjoys a surplus in services trade of $143 billion, along with a net positive secondary income of $100 billion, according to the Reserve Bank of India.
India’s Inward Turn
To reduce this widening trade deficit and improve the growth rate, a strategic shift towards inward orientation has captured the imagination of the Indian intellectual and policy circle, reddening the nation's approach to economic development with increased attention towards foreign investment through initiatives such as Make in India and Aatmanirbhar Bharat than trade. An inward-oriented trade strategy involves a country limiting international trade by focusing on reducing imports. This strategy has two main components: import restriction and import substitution. While import restriction involves curbing imports through measures like high tariffs, import substitution focuses on producing goods domestically that would otherwise be imported.
As part of this strategy, India has employed several trade policy tools to manage imports, including raising tariffs, imposing import licenses, enacting bans, and enforcing stricter quality standards. For instance, average tariffs on industrial products imported from WTO member nations increased from 9.7% in 2014 to 14.7% in 2022—a 52% hike. The import substitution strategy aims to achieve three key objectives: strategic autonomy, foreign exchange conservation, and trade deficit reduction. These objectives are achieved through two ways, one: by prioritizing domestic production in crucial sectors like defense, electronics, and pharmaceuticals, India seeks to enhance national security, reduce reliance on international markets, and shield itself from global economic shocks; two: this approach also aims to boost economic growth by expanding manufacturing, creating jobs, and ultimately strengthening the trade balance.
However, India's import substitution policy dates back to the post-independence era, particularly from the 1950s to the 1970s, aiming for self-sufficiency by promoting domestic industries and shielding them from foreign competition. This approach involved complex licensing, import restrictions, tariffs up to 350%, and outright bans. It successfully expanded the manufacturing sector's GDP contribution from 9% to 17.5% and reduced import reliance. However, the rigid regulatory environment stifled competition, leading to monopolistic practices and an economy reliant on navigating bureaucracy rather than innovation. Despite the focus on self-sufficiency, India still faced currency shortages due to its dependence on imported raw materials and machinery. Ultimately, the policy provided a short-term illusion of self-sufficiency but failed to create a globally competitive industrial sector.
The Need for Export Dynamism
Expectations that import substitution could succeed in India today are based on the assumption that the current environment is significantly different from previous attempts and that new instruments are being employed. However, India's past experiences with import substitution also took place under varying circumstances, yet each attempt ultimately failed. While proponents may argue that the current high import volumes—21% of GDP in 2022 compared to less than 5% in 1970—provide an opportunity to develop domestic alternatives, this perspective overlooks a key aw.10
Historically, India has used import substitution to protect and build industries like steel, aluminum, and automobiles. Today’s more open economic environment, with fewer restrictions on investment and technology, might facilitate a quicker domestic response. However, the fundamental measure of success of import substitution should be the policy's capacity to stimulate overall economic growth. Here, import substitution falls short. It tends to channel resources into higher cost protected industries at the expense of more competitive sectors, distorting economic efficiency and stifling long-term growth. Given this, this section will critically examine the arguments against import substitution and advocate for an export-oriented approach.
A. India's Domestic Market Is Large Enough to Sustain Growth
The push for import substitution stems from the belief that India’s domestic market is large enough to drive long-term growth. Since 2014, the Prime Minister has championed India’s "three Ds"—demography, demand, and democracy—highlighting the domestic market as a key growth engine. While India’s $3.94 trillion GDP may seem impressive, the true measure of market size is the middle class with purchasing power. According to estimates by Arvind Subramanian and Shoumitro Chatterjee, this group accounts for only 15 to 40% of GDP, far smaller than commonly assumed and much less than the global market India could tap into.
Two constraints limit the domestic market’s ability to sustain growth. One, a large segment of the population lacks sufficient purchasing power, and two, the wealthy tend to save more than they spend. As a result, the domestic market alone cannot fuel the robust consumption-led growth India needs. Over-reliance on domestic demand risks overlooking the far greater opportunities in the global marketplace. Although India’s market size may seem large in raw numbers, it falls short of supporting the level of growth the country aspires to. Experts suggest that focusing too much on internal consumption could mean missing out on the vast potential of international markets.
B. India’s Growth Since 1991 Has Not Relied on Exports, Especially Manufacturing
A prevailing misconception is that India's growth since the 1991 economic reforms has not been driven by exports, particularly in the manufacturing sector. This notion is not just inaccurate—it undermines the reality of India's economic narrative. In truth, India has been a notable case of export-led growth, with exports playing a crucial role in its development story. Between 1995 and 2018, India’s export growth averaged 13.4% annually, positioning it as the third-best performer among the world’s top 50 exporters. Even more compelling is the performance in manufacturing exports, long considered India's Achilles' heel. Manufacturing exports grew at an average rate of 12.1% per year, nearly double the global average, a feat only surpassed by China and Vietnam. This robust export performance challenges the notion that India's growth has been inward-looking or solely domestically driven.
Thus, exports have been a substantial engine for India’s GDP growth, contributing about one-third of overall growth in each of the past three decades. The export-to-GDP ratio now stands at 21.89%, more than twice what it was in the early 1990s. This indicates that exports have become deeply integrated into India’s economic structure. In fact, the economy is now more sensitive to export fluctuations than ever before; every 5% decline in export growth could result in a 1% drop in GDP growth. Ignoring this reality in favor of import substitution overlooks the proven and critical role that exports have played—and must continue to play—in India’s path to prosperity.
C. A Pessimistic Outlook on International Trade
The pessimistic view of India’s export future, often citing post-pandemic deglobalization and weak domestic performance, overlooks India's potential to expand its global market share. As of 2022, India’s manufacturing exports make up just 1.8% of global exports—lower than Vietnam’s—highlighting a significant growth opportunity. Even if India’s exports were to grow three to four times faster than global exports, the impact could be transformative. With China gradually moving away from low-skill export sectors, India has a chance to ll this gap and strengthen its export base.
India's export resilience in the 2010s supports this optimistic outlook. During a decade of stagnant global trade, India’s exports grew by around 3%. The perceived decline in export performance was largely due to domestic policy missteps, including a 20% currency appreciation, restrictive agricultural policies, and reputational damage to the pharmaceutical sector. Without these barriers, India's export growth could have been even more robust. Additionally, India has vast untapped potential in unskilled labor exports and services. Unskilled labor exports alone represent a $140 billion opportunity. Furthermore, while global merchandise trade dipped, global trade in services has continued to rise, reaching 7% of global trade. The COVID-19 pandemic has further increased demand for remotely delivered services, aligning with India's strengths. By capitalizing on these opportunities, India can navigate global shifts and establish itself as a leading exporter in key sectors.
In the recent couple of years, the black-and-white distinction between import substitution and export orientation has blurred and a new phenomenon has taken birth. Proponents of import substitution argue that it can coexist with export promotion to drive growth, believing protectionist measures will complement export efforts. However, this view once again works in contrast to the economic principle of maximizing efficiency. With limited resources, prioritizing import substitution diverts support from potential export sectors. Protectionist policies often raise production costs due to tariffs on imported inputs, making both domestic goods and exports less competitive. Additionally, tari s can appreciate the real exchange rate, reducing export price competitiveness. Historical evidence also shows that successful import substitution often leads to a decline in exports as witnessed in the 1960s. By distorting market dynamics and shifting resources into less competitive industries, import substitution ultimately undermines the export-led growth strategy needed for sustained GDP growth. With these considerations, the rest of the paper focuses on analyzing India’s current export pro le and proposes recommendations to reorient its trade strength.
III. A Global Benchmark Analysis
India’s current approach to enhancing its manufacturing sector mirrors the strategies employed by China during its transformative years in the 1970s and 1980s. Programs like Make in India and Production-Linked Incentive (PLI) schemes aim to boost domestic production, reduce import dependency, and increase exports. However, while these initiatives are well-intentioned, they are unlikely to replicate China’s success for several critical reasons. A comparison of India’s strategies with the models of China and the Asian Tigers offers insights into where adjustments can be made to drive growth more effectively.
The Chinese Model of Development
China’s rapid industrial growth was fueled by a series of strategic reforms focused on export-led development. The following were key factors in China’s success:
1. Open Door Policy: China opened its economy to foreign investment and technology transfer starting in 1978. By allowing foreign companies to enter, China leveraged external expertise and capital to accelerate the development of its industries.
2. Special Economic Zones (SEZs): China established SEZs like Shenzhen, offering attractive tax regimes and regulatory incentives to encourage foreign direct investment (FDI). These zones became engines of growth, transforming local economies and boosting exports.
3. Labour Cost Advantage: China capitalized on its abundant labour force to become a dominant player in labour-intensive industries, producing goods at lower costs than developed nations and positioning itself at the heart of global supply chains.
While India’s manufacturing sector has made strides, it faces structural challenges that hinder its ability to follow the Chinese model. For one, India lacks the same level of integration into global supply chains that China had. Despite the existence of SEZs, they have not been as effective in attracting investment or fostering industrial growth. Additionally, India’s manufacturing productivity remains significantly lower, with a Gross Value Added (GVA) per worker of $9,700 compared to China’s $19,000. This productivity deficit, along with infrastructure deficiencies and a complex regulatory framework, further impedes India’s competitiveness. With manufacturing contributing only 17.4% to India’s GDP compared to China’s 27%, India’s current strategy lacks the scale and efficiency needed to replicate China’s success. Furthermore, India’s complex regulatory framework, characterized by bureaucratic hurdles and slow decision-making processes, adds to compliance costs and stifles innovation, particularly in the manufacturing sector.
The Asian Tiger Approach
Instead of following the Chinese model, India can bene t from adopting the export-led growth strategies of the Asian Tigers—South Korea, Taiwan, Hong Kong, and Singapore. These countries combined import substitution with export orientation, developing globally competitive industries that thrived in international markets. The key components of their growth strategy included:
1. Targeted Sectoral Development: The Asian Tigers strategically focused on high-potential sectors, with South Korea emphasising electronics, automobiles, and shipbuilding, and Taiwan leading in semiconductors. Government support through subsidies, tax incentives, and favourable policies helped nurture global giants like Samsung and Hyundai.
2. Foreign Direct Investment (FDI): FDI was a major driver of the Asian Tigers' export success, bringing in advanced technologies and expertise. South Korea and Taiwan used FDI to enhance productivity and innovation, allowing them to integrate into global supply chains. For instance, Taiwan’s rise as a semiconductor leader was supported by foreign rms that developed local suppliers and trained workers.
3. Human Capital Development
The Asian Tigers invested heavily in education and R&D, consistently allocating over 4% of GDP to foster innovation and technological advancements. South Korea’s focus on STEM education, producing over 1 million engineers annually, was key to driving its growth. India, by contrast, invests less than 1% of its GDP in R&D.
Lessons from Emerging Export Powerhouses
In addition to learning from the Asian Tigers, India can draw valuable lessons from the emerging export powerhouses of Vietnam and Bangladesh. Both nations have successfully implemented export-led growth strategies that have rapidly transformed their economies, making them key players in global trade.
Vietnam has made significant strides over the past few decades by adopting an aggressive export-oriented approach. By focusing on high-value sectors such as electronics and integrating deeply into global supply chains, Vietnam has attracted multinational companies like Samsung, which have set up large manufacturing bases in the country. Through strategic Free Trade Agreements (FTAs) and policies that encourage market diversification, Vietnam has strengthened its position in global trade while boosting the competitiveness of its exports.
Bangladesh, on the other hand, has leveraged its competitive advantage in labour-intensive industries, particularly textiles and garments. The country has become the second-largest garment exporter globally by capitalizing on low labour costs and favourable trade policies. Additionally, Bangladesh has made critical investments in infrastructure, enhancing logistics and transportation networks that support its export industry. In recent years, the country has also focused on improving labour standards and adopting more sustainable practices in response to international scrutiny, which has helped it maintain access to key markets.
A list of their key best practices is highlighted below:
1. Export Orientation: Vietnam’s economic rise has been largely driven by its aggressive export-oriented policies, where the government set ambitious growth targets across various sectors. By focusing on high-value products like electronics, Vietnam has diversified its export base, moving away from low-value agricultural goods to more technologically advanced sectors. Pursuing such an export-oriented strategy enables a country to align its production with global demand, tapping into emerging markets and scaling up sectors where it has a competitive advantage.
2. Global Supply Chain Integration: A cornerstone of Vietnam’s success has been its ability to seamlessly integrate into global supply chains. By creating an attractive environment for multinational corporations, particularly in electronics manufacturing, Vietnam has positioned itself as a key player in global trade. Foreign investments, such as Samsung's production facilities in Vietnam, have provided access to technology, expertise, and international markets. For India, strengthening partnerships with multinational rms and increasing its integration into global supply chains can boost the scale and quality of its exports.
3. Infrastructure Investment: Both Vietnam and Bangladesh have prioritised infrastructure development as a critical component of their export strategies. For instance, Bangladesh’s investments in its ports, highways, and logistics systems have dramatically improved the efficiency of its garment industry, reducing export delays and lowering costs. Efficient transportation networks, streamlined customs processes, and modernised ports are essential for ensuring that exports reach international markets on time and at a competitive cost.
4. Compliance and Sustainability: A major turning point for Bangladesh’s textile sector was its shift towards improving labour standards and sustainability following international scrutiny. Bangladesh's focus on ensuring compliance with global labour regulations and adopting more sustainable production practices has been crucial in maintaining market access, especially in Europe and the United States, where strict standards prevail. In today’s trade environment, global buyers increasingly prioritize sourcing from countries with strong ethical standards and sustainable practices.
India’s focus on bolstering its manufacturing capabilities is a positive step, but following China’s model may not yield the same results due to differing structural conditions and global dynamics. By drawing on the strategies of the Asian Tigers—targeting specific industries for development, aggressively pursuing FDI, investing in human capital, and improving infrastructure—India can chart a more sustainable path toward building a robust export-oriented economy. Furthermore, by integrating the best practices from emerging powerhouses into its export strategy, India can enhance its manufacturing capabilities, improve its position in global trade, and sustain long-term economic growth. Each of these strategies—export orientation, supply chain integration, infrastructure investment, and compliance with global standards—serves as a vital pillar for building a more competitive and diversified export economy.
IV. India’s Export Profile
India's latest trade data indicates that export figures for FY 2023–24 is expected to maintain the peak levels of the previous year, with an estimated total of $776.68 billion, slightly surpassing the $776.40 billion achieved in the prior fiscal year. The Ministry of Commerce and Industry reported that FY24 concluded on a strong note, with March 2024 recording the highest monthly merchandise exports of the year at US$41.68 billion. On the other hand, total goods imports for 2023–24 declined by 5.66%, amounting to US$675.44 billion.
India has improved its global standing among merchandise exporters, moving up from 19th to 17th place, with its share of global exports rising slightly from 1.70% in 2014 to 1.82% in 2023. While India's total merchandise exports saw a 3% decline to $437.1 billion in the previous fiscal year, services exports showed a positive trend, rising from $325.3 billion in 2022-23 to $341.1 billion in 2023-24. India’s services exports grew from $53 billion to $338 billion between 2005 and 2023 — almost double the rate of the rest of the world — and have come to form nearly a tenth of the national GDP. Its growth has outstripped that of India’s exports of material goods. In their baseline forecast, our economists expect India’s services exports to touch 11% of GDP by 2030, and to be valued at around $800 billion.
Top Sectors for Exports
A. Merchandise Exports
India's merchandise exports in the fiscal year 2023-24 demonstrated a diverse and robust growth pattern, particularly in the non-petroleum and non-gems and jewellery sectors, which saw a 1.45% increase from $315.64 billion in FY 2022-23 to $320.21 billion in FY 2023-24. This growth was fueled by a range of key sectors that highlight India's expanding export portfolio.
1. Iron ore led India's export growth in FY 2023-24 with a 44.34% increase, highlighting the country's strong position in the global commodities market. Electronic goods also saw a significant rise of 8.90%, reflecting India's growing capabilities in electronics manufacturing.
2. Other sectors contributing to this growth included tobacco (7.33%) and ceramic products & glassware (5.44%), indicating strength in traditional and value-added exports. The agri-food sector made substantial gains as well, with fruits & vegetables (5.22%), meat, dairy & poultry products (4.65%), and spices (4.63%) showcasing India's agricultural diversity
3. Coffee exports grew by 4.60%, reinforcing India's reputation for quality beverages. Additionally, drugs & pharmaceuticals, as well as cereal preparations, saw healthy growth. Modest but notable increases were observed in oil seeds, handicrafts, and cotton yarn/fabrics, with growth rates between 2.53% and 3.64%.
This diverse export landscape illustrates India's balanced approach, leveraging both traditional strengths and emerging sectors. The government's focus on promoting value-added goods and expanding into new markets has positioned India well for sustained export growth, showcasing its evolving role in the global trade arena.
B. Service Exports
Over the past two decades, computer services have consistently been the leading category in India's services exports, a trend that persists today. In 2023, this sector accounted for nearly 47% of all services exports. However, the fastest-growing sector during this period was professional consulting, which experienced a compound annual growth rate (CAGR) of 17% over 18 years. In contrast, travel services exports grew at the slowest pace, mirroring global trends in the travel industry. In addition, Santanu Sengupta, India economist at Goldman Sachs Research, notes that there is potential for India's share of global insurance and financial services to increase. "Financial services is a category where dominant developed market players are gradually losing ground to emerging markets," Mr. Sengupta states in his team's report.
Top Trading Partners
Despite facing global economic uncertainties, India successfully expanded its export reach to 115 countries out of a possible 238 destinations during the 2023-24 period. These 115 countries, accounting for 46.5% of India's export portfolio, include major markets such as the United States, the UAE, the Netherlands, China, the UK, Saudi Arabia, Singapore, Bangladesh, Germany, and Italy. A few key observations include:
1. In FY 2023-24, China surpassed the US to become India's largest trading partner, with total trade reaching $118.4 billion compared to $118.3 billion with the US. Indian exports to China grew by 8.7% to $16.67 billion, driven by sectors like iron ore, textiles, spices, and plastic products, while imports from China rose by 3.24% to $101.7 billion, mainly comprising high-tech equipment and industrial inputs. Conversely, Indian exports to the US decreased by 1.32% to $77.5 billion, and imports from the US fell by 20% to $40.8 billion. The UAE ranked as India's third-largest trading partner with a trade volume of $83.6 billion, followed by Russia ($65.7 billion), Saudi Arabia ($43.4 billion), and Singapore ($35.6 billion).
2. Imports from India's key FTA partners, including South Korea, Japan, Australia, and ASEAN nations, grew by nearly 38%, totaling $187.92 billion, outpacing the 31.4% overall growth in India's total imports. However, India's exports to these FTA partners grew at a slower pace.
3. India is also actively working to expand its export markets by targeting specific countries for various products. Plans include promoting iron ore exports to Kenya, Saudi Arabia, and France, and exploring new markets for engineering goods in Sao Tome, Macao, Georgia, and Croatia. For agricultural and processed food products, the focus is on Nigeria, Switzerland, and Lithuania, while pharmaceutical exports are being directed towards markets like Montenegro and South Sudan.
Top Performing States
India's export landscape showcases varying performances across its states, with Gujarat, Maharashtra, and Tamil Nadu leading the way, alongside emerging contributors like Haryana, Telangana, and Odisha. Gujarat and Maharashtra continue to dominate India’s merchandise exports, though both states have seen a decline in their shares. Gujarat led with a 30.7% share in FY24, down from 32.7% in FY23, but up significantly from 20.7% in FY21, driven mainly by petroleum products, precious metals, and gems. Maharashtra’s share fell to 15.4% in FY24, marking its third consecutive year of decline, with key exports like engineering goods and pharmaceuticals facing intense global competition.
In contrast, Tamil Nadu has been a rising export powerhouse, consistently growing its share from 8.4% in FY22 to nearly 10% in FY24, fueled by a diversified export portfolio and a 77% surge in electronics exports. Emerging states like Haryana, Telangana, and Odisha also showed positive export growth in FY24, leveraging regional strengths. Product-wise, Gujarat's exports are influenced by global market trends, Maharashtra focuses on engineering and pharmaceuticals, and Tamil Nadu boasts a diverse range including electronics, textiles, and automotive products, mitigating global economic risks.
V. Challenges in India’s Export Industry
India's export sector faces several significant challenges that hinder its potential for growth and diversification. These challenges are multifaceted, stemming from structural issues within the economy, global market dynamics, and domestic policy frameworks. Below is a detailed analysis of the key issues affecting India's exports.
Lack of Diversification
India’s export basket remains overly concentrated in a limited number of products and markets, making it vulnerable to global demand fluctuations. As of the latest data, India’s share in the top 100 globally imported products is just 6%, with key exports like refined petroleum, diamonds, and textiles. Despite these being part of the 85% most-imported products worldwide, India’s overall contribution to global imports stands at only 1.5%. This lack of alignment with global demand trends suggests the need for a strategic shift toward product categories with higher international demand.
Declining Share of Labour-Intensive Exports
The decline in labour-intensive exports is a serious concern, particularly given India’s reliance on these industries for employment. Exports from sectors like textiles, garments, and leather have decreased from $90 billion in 2018 to $86 billion in 2023, reducing their share of total exports from 29.8% to 19.5%. Rising labour costs, inadequate infrastructure, and market access barriers in key export destinations have eroded India’s competitiveness in these sectors. Additionally, the slow progress in negotiating Free Trade Agreements (FTAs) with important markets such as the European Union and the UKhas further restricted market access for these products. Addressing these issues is vital to reinvigorating labour-intensive exports and supporting job creation.
Geographic Disparities in Export Contributions
There is a wide disparity in export contributions across Indian states. Coastal states like Tamil Nadu, Gujarat, and Maharashtra account for over 65-70% of total exports due to their superior access to ports and infrastructure. Conversely, landlocked states such as Uttar Pradesh and Chhattisgarh face logistical challenges, including high transport costs and a lack of dry ports and inland container depots. This regional imbalance limits the export potential of many states and underscores the need for infrastructure improvements in these areas to enhance connectivity to international markets.
Inadequate Factor Market Reform
Despite ongoing efforts, reforms in factor markets—such as land acquisition, labour laws, and access to nance—have not advanced sufficiently to boost export competitiveness. Many rms in India still face significant obstacles in scaling operations and adopting new technologies. These challenges hinder their ability to compete in global markets, particularly in sectors that require high productivity and innovation. Without substantial reforms, Indian exporters will continue to face difficulties in integrating into global value chains and enhancing their overall efficiency.
Lack of Firm-Level Competitiveness
Many of India’s export-related policies are formulated at a macroeconomic level, overlooking the specific needs and challenges faced by individual rms. A more nuanced approach that focuses on rm-level competitiveness is essential for integrating domestic rms into global production networks. This shift would provide insights into how rms can enhance their productivity, adopt new technologies, and better compete in international markets. Supporting rm-level innovation and efficiency improvements will be critical to driving export growth and boosting India’s overall trade performance.
By addressing these critical challenges, India can unlock the full potential of its export sector, contributing significantly to economic growth and the country’s ambitions of becoming a $30 trillion economy by 2047.
VI. Recommendations to Boost India’s Export Dynamism
Diversify the Export Portfolio by Targeting High-Growth Sectors India must broaden its export base by reducing reliance on traditional commodities like iron ore and agricultural products. A shift in focus towards sectors with high global demand, such as electronics, pharmaceuticals, engineering goods, and value-added food items is essential. In this regard, Tamil Nadu’s remarkable 77% growth in electronics exports serves as a blueprint for other states to follow. Additionally, labour-intensive industries like textiles, handicrafts, and agro-processing also demand renewed attention. These sectors not only provide significant employment opportunities but also have the potential to drive substantial export growth. By strengthening capabilities in these areas, India can turn its demographic dividend into a competitive advantage in the global market.
Develop Infrastructure and Enhance Logistics for Export Efficiency
A key driver of export competitiveness is infrastructure. An impending need is to invest heavily in improving its logistics network, including ports, railways, roads, and dedicated freight corridors. Such improvements will reduce transportation costs and delivery times, which is critical for time-sensitive sectors like agriculture and textiles. Special attention is also required in the development of cold chain infrastructure for perishable goods, including fruits, vegetables, and dairy products. A robust cold chain will reduce wastage, maintain product quality, and enhance India’s ability to compete in global markets for high-demand agricultural exports. Upgraded infrastructure will not only support export growth but also improve the overall efficiency of India’s trade operations.
Simplify Regulatory Frameworks and Expand Export Incentives
Streamlining regulatory processes is also essential for making Indian exports more competitive, especially for small and medium-sized enterprises (SMEs). A step in this direction would be the introduction of a single-window clearance system that can aid in simplifying compliance procedures and reducing bureaucratic delays. Additionally, the scope of export promotion schemes like the Remission of Duties and Taxes on Export Products (RoDTEP) can also be expanded to cover a wider range of products, ensuring timely disbursement of benefits. This will lower the financial burden on exporters and encourage them to explore new markets. By reducing regulatory complexity and enhancing export incentives, India can make it easier for businesses to scale internationally.
Strengthen Global Trade Relations and Integrate into Global Value Chains
A proactive approach to trade diplomacy by securing Free Trade Agreements (FTAs) with key partners to reduce tari s and gain access to larger markets is the need of the hour. While traditional markets like the US and EU are important, India should actively pursue new opportunities in emerging regions such as Africa, Southeast Asia, and Latin America. Equally important is India's deeper integration into global value chains (GVCs). By encouraging collaboration between domestic industries and multinational corporations, India can enhance its production capabilities, especially in sectors like electronics, pharmaceuticals, and renewable energy. Strategic incentives for foreign investment and partnerships will help India strengthen its foothold in these global networks.
Invest in Skill Development and Foster Innovation to Drive Export Competitiveness
For India to succeed in high-value export sectors, significant investment in skill development is crucial. Industry-specific training programs, developed in collaboration with educational institutions, should be implemented to equip the workforce with the skills needed in growing sectors like electronics, pharmaceuticals, and advanced manufacturing. Additionally, fostering innovation through research and development (R&D) will be key to creating competitive, exportable products. Offering government support for R&D initiatives, particularly in export-oriented industries, will help drive technological advancements and product innovation, positioning India as a leader in cutting-edge global markets.
Meet The Thought Leader
Akshar is a mentor at GGI. After his studies at IIT Delhi Akshar went onto work at EY-Parthenon and later started his own Web-3 venture. Akshar is a boxing enthusiast and is a director at Indian Boxing Council.
Meet The Authors (GGI Fellows)
Manasa Sriram is a senior policy consultant at the Nation First Policy Research Centre, dedicated to driving impactful policy solutions. A graduate of Ashoka University with a keen interest in commercial diplomacy, she has worked on grassroots development projects and conducted policy research for winning State and National political campaigns. An articulate speaker and expressive writer, Manasa is also a passionate Bharatanatyam performer, which complements her work in shaping the Tamil Nadu Art and Culture Policy. Her ability to bridge strategic insights with a love for the arts sets her apart as a thoughtful and innovative policy professional.
Harsimran Passi: I have been fortunate to merge my IT background with my passion for social impact, dedicating three years to national-level nonprofits and NGOs. Currently, I work as a Program Manager at a startup focused on the intersection of technology and social impact. Additionally, I serve as a Global Operations Specialist on the Global Leadership Team at 180 Degrees Consulting, the world's largest university-based consultancy. My goal is to continue leveraging my skills in impact consulting, particularly within the education sector and beyond.
Satyaki Mondal: After completing my PGDM in 2023 with a specialization in finance and marketing, I joined PwC IAC as a Tax Associate and was recently promoted to Associate 2 in May. In addition to my professional achievements, I am an avid marathon runner since 2020 and began hiking in 2021. The mountains provide me with a sense of peace and serve as an important outlet for my personal growth and resilience.
If you are interested in applying to GGI's Impact Fellowship program, you can access our application link here.
References
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