​12% exports growth by 2030 more realistic expectation for India: Barclays

Barclays on Wednesday said that a “more realistic expectation” would be for India’s exports to grow by around 12%, which would result in a global export share of around 4% by 2030, or $1.6 trillion from $0.75 trillion currently as against the target of $2 trillion or 15% growth.

The bank cautioned that weak global growth in the medium term, further fractures in global supply chains, and rising protectionism could challenge the strategy by limiting the potential for trade expansion.

India has been a key beneficiary of the

“China+1” strategy and that the tech-intensity of exports is gradually increasing. India’s export-complexity index rank has improved to 41 in 2023 from 46 in 2001 but compared with emerging market peers such as China (rank: 25) and Mexico (rank: 23), there is clearly a long way to go, it said.

“The biggest policy push is seen in manufacturing exports, where India is slowly yet steadily moving up the value chain, and seeing greater diversification. Still, India's largest goods exports themselves are highly reliant on imports,” said Rahul Bajoria, MD & Head of EM Asia (ex-China) Economics, Barclays.

To reduce certain critical dependencies, the government has launched production-linked incentives, with “mixed success”, Barclays said while highlighting that growing and sustaining exports is necessary to boost medium-term growth and economic stability.

“While we are not arguing for an explicitly manufacturing or goods export-led growth model for India (given that it has already established its advantages in services), there needs to be an increased focus on raising India's goods-export profile, particularly in sectors that have higher elasticity to global growth,” Barclays said.

As per Barclays’ report, sectors in which India has historically had a comparative advantage particularly cotton and textiles, are now slowly losing sheen, in part due to the rise of other low-cost manufacturing competitors such as Bangladesh and Vietnam.

“However, it is important to note that India's top 3 exports, mineral fuels, gems and jewellery, and chemicals, have a large import-dependency,” it said.

In India’s free trade pacts, Barclays also highlighted the added dimension of exporting not just goods and services, but people, to further increase remittances.

Concerns

Despite the multiple advantages of India’s export sector, there are two challenges to achieve the medium-term target of raising its global share in exports to 4-5%: global growth is expected to be slower relative to historical averages for most of this decade and a global shift towards ‘slowbalisation’.

Referring to policy changes such as the US’ CHIPS Act and semiconductor export restrictions on China, it said these suggest the conditions for global trade growth will be “markedly different” going ahead.

As per the report, one particular tailwind for Indian exports is the global effort to build greater resiliency in supply chains, post pandemic.

“This China + 1 strategy can help India gain market share, at the margin, but will also need India to further reduce logistical bottlenecks, and have better execution,” Barclays said.

On the services front, exports are likely to remain elevated given how competitive India's vast talent pool is against high global wage costs.