Role of the Manufacturing Sector in India’s Export Performance

1. Contribution to Export Growth:

• Significant Share in Exports: The manufacturing sector is a critical component of India’s export economy. As of 2024, it accounts for approximately 75% of India’s total merchandise exports. Key export items include pharmaceuticals, textiles, chemicals, and engineering goods.
• High Value-Added Products: Indian manufacturers export a range of high value-added products, such as machinery, electronics, and automotive parts. For example, India has become a significant exporter of pharmaceuticals, including vaccines, which saw a surge in demand during the COVID-19 pandemic.

2. Export Challenges Faced by the Sector:

• Global Trade Tensions: The sector has faced challenges due to escalating global trade tensions, particularly between major economies like the US and China. These tensions have led to increased tariffs and trade barriers, impacting Indian exports. For instance, the trade dispute between the US and China has affected global supply chains and increased the cost of raw materials for Indian manufacturers.
• Supply Chain Disruptions: The COVID-19 pandemic and subsequent global supply chain disruptions have affected manufacturing exports. Issues such as shortages of raw materials and logistical delays have impacted production and delivery schedules. For example, the semiconductor shortage has affected the electronics and automotive industries in India.

Government Strategies to Enhance Export Competitiveness

1. Promoting “Make in India”:

• Boosting Domestic Manufacturing: The “Make in India” initiative, launched in 2014, aims to enhance the competitiveness of the manufacturing sector by promoting domestic production and reducing dependence on imports. The initiative includes support for various industries, including electronics, automotive, and textiles.
• Production-Linked Incentive (PLI) Schemes: The government has introduced PLI schemes to encourage domestic manufacturing and increase exports. For example, the PLI scheme for electronics, introduced in 2020, aims to boost the production of mobile phones and other electronic components within India. In 2024, companies like Apple and Samsung have significantly increased their production in India due to these incentives.

2. Diversifying Export Markets:

• Expanding Trade Agreements: India is actively seeking to diversify its export markets by entering into bilateral and multilateral trade agreements. Recent examples include the India-UAE Comprehensive Economic Partnership Agreement (CEPA), which became effective in May 2022, and the proposed India-EU free trade agreement. These agreements aim to enhance market access and reduce trade barriers.
• Focus on Emerging Markets: The government has been focusing on expanding exports to emerging markets in Africa, Latin America, and Southeast Asia. For instance, India’s exports to Africa have grown due to targeted trade promotion efforts and increased engagement in regional trade agreements like the African Continental Free Trade Area (AfCFTA).

3. Addressing Challenges from Global Trade Tensions and Supply Chain Disruptions:

• Infrastructure Development: To mitigate supply chain disruptions, the government has been investing in infrastructure development, including logistics and transportation. The Gati Shakti National Master Plan, launched in 2021, aims to integrate various infrastructure projects to improve efficiency and reduce logistical costs.
• Trade Policy Adjustments: The government has adjusted trade policies to address global trade tensions. For example, India has implemented safeguard measures and anti-dumping duties to protect domestic industries from unfair competition and imported products dumped at below-market prices.
• Enhancing Export Credit and Insurance: To support exporters facing difficulties due to global trade tensions, the government has enhanced export credit and insurance schemes. The Export Credit Guarantee Corporation (ECGC) has expanded its coverage to mitigate risks associated with international trade.

Recent Examples and Outcomes

• Automotive Industry: In 2024, Indian automotive manufacturers like Tata Motors and Mahindra & Mahindra have increased their exports due to both PLI incentives and the growing demand in global markets. The expansion into new markets, including Africa and Latin America, has contributed to this growth.
• Pharmaceuticals: India’s pharmaceutical exports have seen substantial growth during the COVID-19 pandemic, driven by the country’s robust production capacity and government support for the sector. India became a major supplier of COVID-19 vaccines globally, highlighting its export strength in the pharmaceutical industry.

Conclusion

The manufacturing sector plays a pivotal role in India’s export performance, contributing significantly to the country’s export volume and economic growth. The government’s strategies to enhance the sector’s export competitiveness include promoting domestic manufacturing through initiatives like “Make in India,” diversifying export markets through trade agreements, and addressing challenges posed by global trade tensions and supply chain disruptions. These efforts aim to strengthen India’s position in global markets and ensure sustainable growth in the manufacturing sector.