March 4, 2021

Manufactured Goods Lead Surge in Indian Exports

His company, Precision Automation and Robotics India, has done that. But more recently it has also begun selling robots to Western manufacturers like Caterpillar, Ford and Chrysler. This year, in fact, a third of Precision Automation’s sales will come from exports, up from almost nothing five years ago.

Mr. Date’s company is emblematic of a recent surge in exports of engineered and other sophisticated goods from India — a country perhaps better known for exports of skilled services like software outsourcing.

But in fact, Indian exports of goods are now nearly double exports of services, growing 37.5 percent, to $245.9 billion, in the 12 months that ended in March. Leading the way are high-value products like industrial machinery, automobiles and car parts, and refined petroleum products.

Indian exports are following a different path from that taken by other Asian countries like Japan, Korea and China. Those countries started by exporting products like garments and toys made by large numbers of low-paid, low-skilled workers, before moving to more sophisticated products like cars and industrial machinery.

India has largely skipped the first step and gone straight to producing capital-intensive items that require skilled workers but not necessarily many of them. Rather than pursue the traditional developing-country model of exports, India aspires to eventually achieve something more like Germany’s mix of industrial goods for the global market — even if India has a long way to go before approaching Germany’s $1.3 trillion in annual exports.

Over the last decade, industrial export hubs have sprouted around India, some with the help of government planning. Here in Pune, about 100 miles east of Mumbai, a vibrant domestic automotive and engineering hub supplies the United States and other Western markets.

Chennai in the south has become India’s Detroit, as car factories ship small Fords, Nissans and Hyundais to Europe, Africa and Latin America.

In the west, Gujarat State is home to several large petroleum refineries that take imported crude oil and process it into products like jet and diesel fuel that are sold in other Asian countries. (The need to import crude oil for domestic use, though, is the main reason India continues to run a trade deficit — $104.8 billion in the last fiscal year.)

Meanwhile, traditional exports like textiles and agricultural products together account for less than 20 percent of the goods India sells to the world. India now exports fewer garments than its neighbor Bangladesh, which has one-eighth India’s population and an economy only about one-fifteenth as large.

“India has moved away from the textiles story,” said Rohini Malkani, an economist at Citigroup in India. “Now, it’s engineering goods and chemicals, including pharmaceuticals.”

In many ways, these are virtues born of necessity. The country’s poor transportation and electricity infrastructure and restrictive labor laws have discouraged companies from setting up labor-intensive manufacturing plants like those for which China is known. Instead, many Indian exporters specialize in higher-value goods and services that require fewer, but more skilled, workers.

The flowering of these industrial bases can be traced to the early 1990s. That is when a financial crisis forced Indian policy makers to slough off socialist policies known as the “licenses raj,” which tightly regulated industrial production and kept foreign competition out. The changes let businesses set up factories based on market demand and allowed foreigners to invest in India, exposing domestic companies to greater competition.

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