While global trade
growth is expected to rebound in 2017, India may not be in a position to fully take advantage of it in United States and China, which are the major markets where consumer and industrial demand
On Thursday, the World Trade
Organization (WTO) raised the estimate of growth in world merchandise trade
volume for 2017 to 3.6 per cent up from the 2.4 per cent estimate earlier.
The latest rise has been due to positive economic trends in North America - with the United States in particular - along with China, which has lead to resurgence of industrial and consumer demand.
However, exporters and trade
experts alike believe it will be difficult for India to tap into this demand
in the near future for a plethora of reasons.
Stagnation in the US
is the largest destination for Indian exports, earning $42 billion in 2016-17. The share of goods heading to the US
has gradually increased over the past five years and stood at 15.3 per cent last year.
However, major export
categories such as textiles, gems
have seen stagnation in the US
India's textile exports, across categories such as apparels and accessories have suffered over the past few years due to the onslaught of cheaper alternatives from Bangladesh, Vietnam
"Our market share has stagnated in the low single digit levels and I don't see a change anytime soon, both in the United States or Europe." S K Jain, Chairman of the Apparel Export
Promotion Council said.
On the other hand, India's exports in gems
and especially rough or processed diamonds, stood at $9.7 billion, up 12 per cent in the last year. But industry experts believe the trend may be reversed next year.
For pharmaceutical products, the US
is a major market for Indian generics, almost half of which, by volume, reach US
shores. "In the United States, almost 80 per cent of generics are sourced from India. However, the market share has stagnated while growth in value terms have slowed down", P V Appaji, past Executive Director at Pharmexil said.
This is mainly due to price erosion, he added.
Not geared for China either
On the other hand, India is ill-equipped to grow its exports to China.
While its northern neighbour is its largest trading partner, only 3.68 per cent of India's exports find their way to China.
Apart from finding it difficult to bridge the whopping $51-billion trade
deficit, India is also looking to upgrade its current basket of exports to China.
Raw materials like cotton, iron ore and copper - long a hallmark of Indian exports
to neighboring China
- has come under increased scrutiny as both government as well as exporters try to shift exports towards value added products in a bid to cap growing trade
While previous Commerce and Industry Minister Nirmala Sitharaman
had earlier said that export
focus should shift from raw materials, her Ministry has identified key sectors such as hardware, electronics, pharmaceuticals, textiles
and auto components, to realign and boost exports.
With a burgeoning middle class and rising labour prices, China
is expected to relinquish its dominance over the labour intensive, low-end manufacturing space in the near future, which is being eyed by the Indian industry.
A changing consumer pattern has also moulded a greater demand
for consumer goods
where overall demand
in the first half of 2017 was driven by solid growth in industry (up 6.4 per cent) and even stronger growth in services (up 7.7 per cent).
"We are looking to harness our strengths in labour intensive sectors where India enjoys significant advantage over other developing nations," a Commerce Ministry official said under conditions of anonymity.
Currently, the top 5 export
categories to China
are all input products. These are used by China
to manufacture costlier goods which it ships abroad, often back to India.
These, along with other raw materials like iron and iron ores, constitutes for more than 70 per cent of India's exports to China, Ajay Sahai, Federation of Indian Exports
These are subject to volatile global commodity prices and should be periodically swapped with products higher in the value chain, a Delhi based trade