Trillion Dollar Exports
How many countries export goods and services every year valued at more than $1 trillion? Just three: China ($3.55 trillion), the United States ($2.53 trillion) and Germany ($2.03 trillion). These are the latest World Bank figures for calendar 2021. The numbers for 2022 are due soon but unlikely to be much higher owing to trade disruptions caused by the Russia-Ukraine war.
Japan, South Korea, Singapore, the Netherlands and Hong Kong are big exporters too, but below the $1 trillion mark.
Where does India stand? Driven by surging services exports, India’s total exports of goods and services in 2022-23 was $770 billion. Of this, merchandise exports were $448 billion and services exports were $322 billion.
While merchandise export growth has softened, services exports continue to rise. The projection of total exports for 2023-24 is $850-$900 billion. If that holds good, and overall export growth remains strong at 15 per cent, India could by 2024-25 become the fourth country in the world to join China, the US and Germany in the trillion-dollar export club.
While trade disruptions and sanctions continue to pose a challenge to India’s export growth, several other factors have turned favourable. Apple’s decision to make India an export hub for iPhones will lead to 25 per cent of all iPhones being manufactured in India by 2025-26. The total global sales revenue of iPhones in calendar 2022 was $201 billion. India is set to account for a quarter of that – over $50 billion. The majority will be exported. Hyundai and Maruti Suzuki have similar plans to turn India into an automotive export hub.
Meanwhile services exports are set to receive a further boost from the partial opening up of legal services to foreign firms and international lawyers on a reciprocal basis. But the larger potential lies in Global Capability Centres (GCC) set up by multinational corporations. The export potential through 1,700 GCCs currently operational in India, employing 1.7 million people, is significant.
According to analyticsindiamag.com, “India accounts for 45 per cent of GCCs in the world. Last year, Goldman Sachs said it would hire around 2,500 people by 2023 to expand its operations in Hyderabad. Over the years, the centre has become one of the largest technology hubs globally, with about 7,000+ professionals. The investment bank launched the Hyderabad centre to drive engineering and business innovation in India. Pharmaceutical giant GSK has set up its GCC in Bengaluru. The GCC team currently focuses on pharmaceuticals, vaccines and consumer healthcare. R&D leverages genetics and advanced technologies to support its global pharmaceutical business and consumer healthcare business by developing an innovative portfolio of consumer-preferred and expert-recommended brands in pain relief and respiratory care, skincare, digestive health, etc.”
Ramkumar Ramamoorthy, a former managing director of Cognizant India, added in a recent article in The Times of India: “In my 22 years at Cognizant I have had the opportunity to witness the diverse facets of GCCs – from the company being incubated as the in-house technology arm of Dun & Bradstreet Corporation, to incubating iNautix, the technology arm of BNY Mellon, to acquiring the in-house centres of UBS, KBC and Invensys (now Schneider Electric) to co-locating two in-house centres of large enterprises within a fully-owned campus.
“The environment in which GCCs operate today is vastly different. From technology being ‘an enabler of business’ to technology being ‘the business’, the definition of what is ‘core’ and ‘context’ to a company has been meaningfully and permanently altered. As such, the cliché that foreign MNCs come to India for cost, stay on for quality, and expand for innovation is no longer applicable. Today, these companies establish their GCCs in India to digitally transform their businesses, better compete against new-age startups, drive research on newer technologies, and develop pathbreaking solutions, products, platforms, and IP for global consumption.”
While India’s infotech companies, large and small, account for $200 billion or over half of total services exports, medical, legal, financial and other consultancies are leveraging domain skills and lower costs to enable India to become the world’s omnibus high-technology office.
When India crosses $1 trillion in exports, services exports will, at just under $500 billion, likely contribute half of the total. These numbers are not utopian. At over $32 billion a month currently, services exports are already on a trajectory of $400 billion a year and growing at 15-20 per cent annually.
It’s important to put these figures in perspective. India’s huge crude oil import bill (4.5 million barrels a day at an average of $70 per barrel) is currently over $110 billion a year – a major contributor to the current account deficit (CAD). But it will soon be dwarfed by India’s services exports. Significantly, the crude oil revenue of the world’s largest oil exporter, Saudi Arabia, which ships 10 million barrels a day, is $240 billion a year – less than India’s services exports today.
This should not cause complacency among Indian policymakers. To make the export of manufactured goods – from cars and phones to electronics and pharmaceuticals – competitive, the government must upgrade logistics: ports, roads and railway lines.
The Adani group’s 13 ports and terminals account for 24 per cent of India’s port capacity. They are connected by over 300 kms of dedicated railway lines, the largest private railway holding in India. It has helped reduce port turnaround time for containers to match the speed of ports in Singapore and Shanghai. Making Maruti Suzuki cars and Apple iPhones for export is one thing; getting them to their destination rapidly needs coordination between transporters, ports and customs.
While China’s total exports are largely merchandise with few services, making it a global factory of everything from electric vehicles (EVs) to children’s toys, India’s export basket is well balanced between goods and services.
