India's Export Enigma: Why We're 'Relatively Irrelevant' in Global Trade

In a candid and thought-provoking assessment, Deepak Shenoy, CEO of Capitalmind, has stirred significant debate by declaring India "relatively irrelevant" in the fiercely competitive world of global trade. His stark analysis serves as a crucial wake-up call, challenging long-held assumptions about India's economic trajectory and its ambitious goal of becoming a global powerhouse.

Shenoy's concerns are rooted in tangible data.

He points out a sobering historical trend: India's share in global trade, which stood at a modest 2% in the 1960s, has actually declined to a mere 1.7% today. This downward trajectory becomes even more alarming when juxtaposed with economic giants like China, whose global trade footprint surged from a tiny 0.7% to a colossal 15% over the same period.

The stark contrast underscores a fundamental challenge India faces in leveraging its demographic dividend and economic potential on the international stage.

The fragility of India's export economy is further laid bare by its export-to-GDP ratio, hovering around 12-14%. Compare this to the dynamic economies of Southeast Asia, such as Vietnam, where exports constitute over 90% of the GDP.

This chasm highlights India's inward-looking economic structure, where domestic consumption often overshadows export-driven growth, limiting its exposure and influence in global supply chains.

A critical facet of Shenoy's argument revolves around the composition of India's exports. The lion's share, he notes, comes from services, not manufactured goods.

While India's prowess in the services sector, particularly IT, is undeniable and a source of national pride, this over-reliance creates a precarious imbalance. Global economic downturns or shifts in demand for services can leave India vulnerable, unlike economies with diversified manufacturing bases that can weather such storms more effectively.

The absence of large-scale manufacturing facilities capable of producing goods for global consumption is another major stumbling block identified by Shenoy.

He laments India's struggle to compete with nimble, cost-effective manufacturing hubs like Vietnam and Bangladesh in sectors such as textiles and electronics. These countries have successfully integrated into global value chains, building robust ecosystems that attract foreign investment and foster export growth.

India, despite its vast labor pool and growing infrastructure, has yet to replicate this success on a significant scale.

Shenoy's remarks are not merely a critique but an urgent call for introspection and strategic recalibration. For India to truly ascend as a global economic leader, a fundamental shift is required – one that prioritizes the establishment of a competitive, high-volume manufacturing sector alongside its thriving services industry.

Only then can it overcome its "relative irrelevance" and carve out a significant, resilient position in the intricate tapestry of international trade.