Export Industry Outlook for the Next 5 Years 🗓️
According to the IMF, the Indian economy is projected to drop by 10.3% this fiscal year due to the Covid -19 pandemic. However, it is expected that India will rise at an annual rate of 8.8% in 2021-22.The Union Budget 2021-22 paved the way for large revival, with a focus on infrastructure, wellness, banking, and agriculture and so on.
However, in order to sustain this recovery and realize the ‘Make in India' dream in the short run while also achieving ‘Make for the World' in the long run, India wants a robust foreign trade policy to help exporters and reverse the economic slowdown caused by the pandemic.
Exports Projected to Grow at 7.2 % from 2021 to 2025
Over the next five years, India will witness the highest economic growth among all the other nations. Though the country was hard hit by the Covid-19 pandemic and resulting harsh lockdown, the effect of infection rates seems to be lessening in recent months, and recent economic indicators are hopeful. Increased demand, investment and exports will stimulate growth in the coming years, although a desirable premise impact will also play a factor in 2021.
The Domestic vaccines are well advanced and recent economic factors such as PMI readings and trade results are compelling. With Covid-19 in control, the economy has already begun to normalize sooner than predicted. Front-loaded and higher government budgets, the lagged impact of easier financial markets, faster global markets, and continuing vaccines could all converge to cause cyclical growth to accelerate sharply.
We maintain our above-consensus actual GDP growth estimate of 13.5 % year on year in FY22, compared to -6.7 % in FY21, with the budget adding upside risk to our FY23 projection of 6.1 %. These reforms, once initiated, have the potential to improve the development prospects for several years to come. However, downside threats persist due to speculation about the pandemic's evolution, a precarious fiscal situation, and a patchy proven record on structural reforms.
India’s Largest Exports
In recent years, India mainly exported pearls and gems and precious stones (16%) and oils, waxes (12%) and vehicles, components and supplies (5%) and nuclear reactors, boilers, machinery and mechanical appliances (5%) and pharmaceutical products (5%) and organic chemicals (4%).
The principal export partners of India are the United States (15%), the United Arab Emirates (11%), Hong Kong (5%), China (4%), Singapore (4%) and the UK (3%).The Indian Gems and jewellery market, which contributes about 29% of the world's jewellery consumption, is one of the largest in the world.
By 2025, Indian economy aspires to reach US$5 trillion
India has an estimated GDP growth of 8 % or more to achieve this dream in the coming years and Triple exports to one trillion US$ by 2025, with the government committed to progress toward the 5-trillion-dollar dream. With a nominal GDP of US$3.7 trillion, India will overtake both France and the United Kingdom as the world's fifth largest economy by 2024.
More favourable still, the pandemic's misery has led to a sudden spin on the economic reform front, seeking reforms in the fields from labor legislation and agriculture to banking. These reforms could improve the prospects of growth in the coming years if implemented. However, in the context of instability as far as the pandemic is concerned, the downside risks remain, the fiscal situation is fragile and structural changes are well tracked.
India's exports grew 3x from April 2020 to April 2021
India's exports in April 2021 were recorded at US$30.63 billion, as compared to US$10.36 billion in April 2020, exhibiting a growth of 195.72 %. In Rupee terms, exports were Rs.2,28,071.76 crore in April 2021, as compared to Rs.78,951.41 crore in April last year.
The absolute export of US$30.63 billion is not only an increase from a low base, but also one of the best-performing growth rates in the last five years. Despite the lockdown and restrictions in many areas of the region, exports improved across the country in April 2021.
The ability to maintain such a stellar result is contingent on the ease with which lockout constraints can be relaxed and global market sentiments remain positive.
Sectors that can Boost India's Growth in the Next Five Years
India could expect to generate US$300 billion in the next five years by exporting electronics manufacturing, water management, defence manufacturing, EV charging, and data centers.
India's domestic demand in this industry currently amounts to US$70 billion, which is just 3.3% of the global economy.
It provides us with a broad spectrum country growth. The electronics exporters of the country could grow from US$11.28 billion in FY20 to US$180 billion in 2025, as some forecasts suggest.
India needs a strong water management policy to support its agricultural production and for drinking water. Advanced technologies will make a significant contribution to achieving both. As part of its "Nal Se Jal" program, nation will need US$100 billion in water investments in India in the coming five years. The investments will be in EPC, tubing, generators, locks, cement, water treatment plants, hydropower and so on.
Globally, the demand for smart water management is expected to reach US$21 billion by 2024, rising from about US$12 billion now. India's large surface water supplies, spread through time and space, contribute a remarkable share to the industry.
Between 2016 and 2020, India's defence manufacturing sector grew at a 3.9 % CAGR. The Indian government has set a target of US$25 billion in defence production by 2025 (which includes US$5 billion in exports by 2025).
In 2019-20, India's defence exports are expected to be worth US$1.29 billion. The size of India's defence imports in FY20 was US$463 million, and it is forecast to be US$469.9 million in FY21.
Though the adoption of electric vehicles (EV) has been slow in India, the government has consistently supported its future development. EV charging requirements can rise in tandem with EV adoption. If EV acceptance increases, India will need approximately 4,00,000 charging stations by 2025. This equates to almost US$20 billion in spending.
Charging stations in remote or rural areas will actually require full energy services that provide backup battery, power efficiency, remote monitoring, and maintenance.
As the country's EV adoption grows, major players including Hero Electric, Tata Motors, Ather Energy, Mahindra Electric, and Lohia Auto stand to benefit.
If 5G allows the aggregation of massive volumes of consumer data, the need for more data center’s for storage will increase. According to industry figures, the data center outsourcing sector in India is currently worth around US$2 billion. This is expected to rise at a CAGR of 25% to US$5 billion by FY24.
Indian Export Businesses Face New Challenges
For international trade, Covid-19 has been disastrous. In April 2020, Indian exports declined record-breaking 60%, while imports dropped by 59%. While the condition has improved, it is a long and difficult way to recover. The current trade agenda would then supply the goods based on contributions from merchants, trade associations, parliamentarians and a high-level advisory committee formed by the government.
Covid-19 is an unpredictable and unimaginable situation that has turned the world upside down, and it, like any massive revolution, is assessing the industry's endurance. Exports from India surged 195.72 % year-on-year to US$30.63 billion in April 2021, as foreign demand rebounded from last year's record slump.
Sales rose for gems & jewellery, jute manufacturing including floor covering, carpet, handicrafts excluding handmade carpet, and leather & leather products, among others. India's exports in April 2021 jumped nearly three-fold to US$30.63 billion on account of healthy growth in sectors like gems and jewellery and engineering, even as the trade deficit widened to US$15.1 billion, as per commerce ministry.
The country's merchandise exports stood at a lowly US$10.36 billion in April 2020, hit by the India's exports have seen a healthy expansion in sectors such as gems and jewelry and engineering almost rise to US$30.63 billion in April, while the trade deficit narrowed to US$15.1 billion, according to ministry of trade numbers.
In April 2021, goods exports from the country amounted to a low of US$10.36 billion. India's export success in April also stands out, and the economic turnaround in increasing imports is also evident that foreign trade is balanced recovering, sure that this year we will be able to cross US$400 billion.