India, being one of the fastest growing economies in the world, has emerged as an important player in the global economic order. What was once an inward-looking economy has now a trade-to-GDP ratio of 31% and is the fifth largest exporter amongst the emerging economies. Export data from UNCTAD shows that Indian exports are witnessing a diversification, both in terms of the export basket as well as in terms of destinations. While India’s export destinations are moving towards emerging markets, its commodity basket is moving towards resource-based manufacturing at the cost of primary products and manufactured goods. Within manufactured goods, India is gradually moving towards high and medium tech goods at the cost of low technology goods, but the share remains significantly below the EM average.

Evolution of India’s Export Basket

India’s export basket is evolving and is moving towards more sophisticated products. On comparing the export basket in 1995 to the basket in 2015, one can clearly see that goods like petroleum products, transport equipment, industrial machinery and parts, and electrical machinery and appliances have gained prominent share in the export basket at the cost of primary and low technology manufactured goods like coffee, spices, feedstuff for animals, vegetables and fruits, footwear etc. India’s top exports comprise of goods like textile and apparel products, gems and jewellery, petroleum products, medicinal and pharma products, road vehicles, organic chemicals iron and steel, transport equipment, cereals, metal manufacture, industrial machinery and electrical machinery and appliances. Textile and apparel with a share of 13% and gems and jewellery with a share of 12% continue to be India’s top exports, suggesting India’s comparative advantage in these categories, although the share has declined to indicate export basket diversification.

The shift towards resource-based manufacturing exports has largely been due to expansion in domestic petroleum refining capacity. As a result of the same, India is outperforming most other EMs in resource-based manufacturing. Figure 1 and 2 gives a glimpse of the same.

As far as the exports of manufactured goods are concerned, India has not been able to increase its share in manufactured goods over the last two decades and it remains a laggard as compared to other EMs. Figure 3 captures this fact.

However, when one observes the technological intensity of India’s manufactured exports, one sees the exports moving gradually towards high and medium technology goods at the cost of low technology goods. Although when the technological intensity is compared across other EMs, China and Mexico are far superior to India.  Figure 4 and 5 capture the same.

Destination-wise Shifts

One can easily see the evidence of a growing ‘South-South trade’ from the Indian export data – the share of developed markets has fallen from 72% in 1995 to 47% in 2015, and, the share of emerging markets which was just 28% in 1995, has risen to 53% in 2015. Figure 6 shows how emerging markets are gaining share in Indian exports at the cost of developed markets with their increasing share of world GDP.

The US continues to be India’s largest export destination with about 16% share in 2015, although the share has fallen as compared to 1995 when it was 20%. Major share gainers have been UAE, China, Vietnam, Turkey, Sri Lanka, Nepal and South Africa.

UAE has emerged as an important export destination for India with its share increasing from just 5% in 1995 to 12% in 2016. A major trend observed is that although the share of most developed markets in India’s exports has fallen, India’s share in the imports of those markets has risen, indicating the diversification of Indian export destinations as well as India’s growing significance in these markets. India’s share in the imports of these countries, although growing, still remains small.

China has grown in importance as an export destination after its accession to the WTO in 2001. The US is India’s largest market for pharma, and textile and apparel exports. Therefore, Trump’s protectionist trade policies could be a looming threat to Indian exports. However, so far India has benefitted from Trump’s withdrawal from the Trans-Pacific Partnership (TPP) since the ratification of the TPP would have meant a greater market access to Vietnam, which is a signatory to the TPP and India’s stiff competitor in Textile and Apparel segment.

A changing world order after 2010?

As the world is becoming more protectionist, the global trade outlook seems uncertain. The conjecture of an increasing inward sentiment is further supported by the data which shows how the GDP growth rate of both EM and DM were highly correlated with both the Indian and global export growth till 2010. With the economic stagnation post-2010, this relation between GDP growth rates and export growth has decoupled, suggesting an emergence of an inward-looking approach, especially by the DMs.  Figure 7 captures this finding.


Although India has managed to diversify its export basket in the past two decades, its market share in most product categories remains low, indicating a need to make domestic products more competitive. Likewise, Indian exports have witnessed diversification in terms of destinations but the country’s share in the import basket of its major trading partners (except UAE) remains small. In conclusion, India needs to step up its performance as far as the exports of manufactured goods are concerned and the success of ‘Make in India’ could be the key to this.


Paridhi Rathi

This article has been written by Paridhi Rathi, a student at the Meghnad Desai Academy of Economics.