India's stellar export performance in 2021-22, with merchandise exports totalling over $400 billion, compared to a pre-pandemic five-year average of $300 billion, has drawn its fair share of both cheerleaders and sceptics. The former sees this not just as a surge driven by a US-led global economic recovery, but also find elements of a structural shift. This shift could fulfil India's 'China+1' aspiration, in which global companies shift away from China to source inputs and rely more on India instead.
Sceptics, however, see the boom as largely driven by global commodity inflation. That is, India is selling the same or even lower of volumes of a commodity, but higher international prices are fetching exporters much larger dollar amounts.
For something as heterogeneous as goods exports, broad generalisations are misleading. The assessment has to be granular. The drivers of each category of goods sold abroad need to be analysed objectively, untarnished by the agenda or proving a point or picking a side. For one thing, export growth in 2021-22 has been broad-based. About 89% of the export basket has already crossed the pre-pandemic levels.
However, going by HDFC Bank estimates, perhaps most importantly, the share of India in global exports has risen to over 1.8% in 2021-22, about 15 basis points (bps) higher than pre-pandemic levels. A bps is one-hundredth of a percentage point, and while 15 seems a small number, given the sheer magnitude of global trade, it is not to be sneezed at.
A couple of trends are worth noticing. There was a noticeable shift in the composition of exports in the pre-pandemic years that has sustained through the pandemic. The decline in the share of gems and jewellery (G&J), traditionally an export heavyweight, in the overall basket is a good example. Much of this category comprises diamond-cutting and polishing, where rough stones are imported and polished stones re-exported. The economy's net gain from these exports is simply the value addition in processing 'roughs'.
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