May 5, 2016 by iMFdirect
By Rahul Anand, Kalpana Kochhar, and Saurabh Mishra
The expansion of India’s exports of services between 1990 and 2013 has been nothing short of spectacular, putting India on a par with the world’s high-income economies in terms of service-product sophistication and as a share of total exports. This has created unique opportunities for continued growth. By contrast, when it comes to exports of manufactured goods, India has lagged behind its emerging-markets peers, both in quality and as a percentage of the total export basket, leaving substantial room for improvement.
While trade leads to structural transformation and diversification of economies, the types of goods and services traded—and trading partners—make all the difference. India should capitalize further on its comparative advantage in exports of high-value services. At the same time, it should also increase the quality, sophistication, and diversification of manufacturing. That way, India can expand its total exports, while improving the sophistication of goods and services, and diversifying into higher value-added activities that generate better jobs for Indians.
Our new paper looks at the evolution and prospects of India’s exports documents and analyzes the technological content, quality, sophistication, and complexity of India’s export basket. It also discusses their implications for future export performance, structural transformation, and growth.
India’s exports evolution
The evolution of Indian exports follows a unique growth model: a well-integrated, technologically advanced, and highly sophisticated service sector thrives alongside a lagging manufacturing sector. At 32 percent, the share of services in total exports is now more than double the average for emerging markets (EMs) and exceeds that of many advanced-income economies. At the same time, the share of goods exports in total exports declined from nearly 80 percent in 1990 to 67 percent in 2013.
India owes its rapid growth in service exports to the emergence of modern services, defined as products that can be stored and traded digitally. The fastest-growing sector of the global economy, exports of modern services account for nearly 70 percent of India’s total commercial-services exports, double the average for emerging markets.
Click here to read full article
