India’s trade in goods and services has been declining as a percentage of its gross domestic product over the past decade, despite the country’s significant economic growth, according to a World Bank report released on Tuesday. The report highlights that India’s share in global trade has not kept pace with its rapidly expanding economy, with the country increasingly losing out to smaller rivals such as Bangladesh and Vietnam as low-cost manufacturing export hubs.
The World Bank noted that India’s share in global exports of apparel, leather, textiles, and footwear grew from 0.9% in 2002 to a peak of 4.5% in 2013. However, this figure has since dropped to 3.5% by 2022. In contrast, Bangladesh’s share in these sectors reached 5.1%, while Vietnam’s share stood at 5.9% in 2022. To regain its competitive edge, the World Bank suggested that India must focus on reducing trade costs, lowering tariff and non-tariff barriers, and revising trade agreements.
“This is an area where India could focus on,” stated Nora Dihel, a senior economist at the World Bank, during a press briefing in New Delhi. “This is a call to action.”
Prime Minister Narendra Modi has expressed his ambition to transform India into a manufacturing hub as global businesses seek to diversify their supply chains away from China. The Indian government has invested heavily in subsidies to attract foreign investment in industries such as electronics and chip-making. However, the World Bank cautioned that India’s export sectors are becoming increasingly capital-intensive, which limits their ability to absorb the country’s large pool of unemployed workers.
Despite these challenges, the World Bank projects India’s economy to grow at a robust pace of 7% in the current fiscal year, with growth expected to average 6.7% in the following two fiscal years.
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