Broadening of India’s Export Spectrum

By 2022, India has added an impressive 628 new products to its export portfolio, supplementing the 3800 products it has been exporting since 1994.

• These new additions primarily include advanced manufactured goods, chemical products, and electronic items.
• The number of new products has been steadily increasing over the years.

Dominating New Product Categories:

• India has carved a niche for itself in certain new product categories, such as turbojets and defence equipment.
• The country has also ventured into new markets like railcars and renewable energy.

Changes in Traditional Products and Export Growth Rates:

• Traditional export items like helicopters, arms and ammunition, and electrical machinery have seen a surge in growth rates.
• While India's top three export products (petroleum, diamonds, and medicaments) continue to grow, their overall share is diminishing.

Influence of Product Basket Shift on Exchange Rate Sensitivity

• As the export basket leans towards high-value goods, the exports' sensitivity to exchange rate fluctuations decreases.
• Econometric studies suggest a notable decrease in exchange rate sensitivity post the global financial crisis.
• The impact of a percentage appreciation in the rupee on exports is reduced due to higher value-added products.

Merging with Global Value Chains (GVCs)

• India's increasing integration with GVCs is contributing to the reduced sensitivity to exchange rates.
• Most of India’s participation in GVCs has been in the upstream sectors such as chemicals, machinery, and metals.

Significance of Downstream Linkages and the Production-Linked Incentive Scheme (PLI)

• Policies like the PLI scheme can help develop downstream linkages and integrate India into downstream GVCs.
• Encouraging global manufacturers to establish their units in India can strengthen downstream GVC integration.

Assembly Units, Value Addition, and Job Creation

• While assembly units may not contribute much in terms of value addition, they can generate jobs for low-skilled workers.
• Assembly units can create backward linkages to domestic sectors, leading to additional value addition.
• Over time, these firms may progress into producing more sophisticated components, thereby increasing value creation.

Unbundling Services and India’s Performance in the Services Value Chain

• Services can be divided into various processes, creating a global value chain for services.
• India’s services value chain has evolved from providing cost-effective back-end services to delivering upstream, high-value-added services.
• The growth in services exports indicates low susceptibility to changes in global income fluctuations.

Resilience of Services Exports to Global Income Fluctuations

• The export of services to countries like the US and Canada has a low correlation with GDP growth in these countries.
• India’s services exports show market resilience and are less impacted by global income fluctuations.

Enhancing Manufacturing GVC Integration through Exports of Services

• Exporting intangible services related to pre- and post-production activities can boost India’s integration into manufacturing GVCs.