Six sectors to help India become export powerhouse by FY28

BUSINESS DESK: India’s export growth has been propelled by six megatrends that got fast-tracked during the pandemic (2020, 2021), driving overall export attractiveness for multiple sectors in India.

Going forward, chemicals, pharmaceuticals, electronics, automotive, industrial machinery, and textiles (among others) are expected to propel India’s manufacturing exports to $1 trillion by FY28, according to a report of Bain & Company.

India’s exports have seen tremendous growth over the last two years, with a compound annual growth rate (CAGR) of 15%, rebounding from 5-10% in the pre-pandemic years.

India’s manufacturing exports reached an unprecedented $418 billion in FY 2021-22, an overall on-year growth of more than 40% compared to the $290 billion from the previous year. The sharp rise in exports last year has been on the back of a significant increase in share of manufacturing in the country’s exports.

According to the report, India is on the cusp of structural shifts, especially in the manufacturing sector. Despite having the sixth-largest economy in the world, contributing to 3.1% of the GDP, India’s export contribution to global trade is still only 1.6%. However, that is going to change, buoyed by the government’s robust policy thrust, initiatives like production-linked incentives (PLIs) to encourage local manufacturing, and fresh investments that are pouring into the country’s core industrial sectors.

Megatrends shaping India’s manufacturing sector

Supply chain diversification: India among top four destinations for relocation of American companies

Sectoral advantages: India’s advantage in Pharma, Chemicals, Industrial machinery, Electronics, Automobile, Textiles

Government initiatives: Thrust on fresh investments and ease of doing business, PLI outlay of $47.8 billion and FDI policy improved capital inflow and ease of doing business

Capex-led growth: Growth and high-capacity utilisations, Projected next five years capex is six times higher than last five years

Mergers and acquisitions: Driving growth and reshaping portfolio, In 2021, 90 strategic deals with cumulative value of $100 billion finalised

PE/VC-led investments: Digital and technology-led disruption in manufacturing, PE/VC investments in Indian firms up 55% since 2019, hit record $70 billion in 2021

Manufacturing is emerging as an integral pillar in India’s economic growth, thanks to the performance of key sectors like automotive, engineering, chemicals, pharmaceuticals, and consumer durables.

The Bain & Company report stated that propelled by favourable megatrends in manufacturing, India is expected to scale up its manufacturing exports to $1 trillion by FY28, and much of this growth will come from Chemical, Pharma, Industrial Machinery, Electrical & electronics, Automotive, and Textile & apparel sectors.

Sectors that will drive manufacturing export growth, enabling India to achieve $1 tn in exports by FY28

Picture Credit: Bain & Company
Chemical $110–$130B
Projected exports CAGR: 19%–23%
Hot segments: specialty chemicals, agrochemicals

Pharma: $45–$50B
Projected exports CAGR: 16%–18%
Hot segments: active pharmaceutical ingredients and drug intermediaries

Industrial machinery: $70–$75B
Projected exports CAGR: 18%–20%
Hot segments: Food processing machines and textile machines

Electrical & electronics: $120–$145B
Projected exports CAGR: 35%–40%
Hot segments: Mobile phones & Industrial electronics

Automotive: $45–$55B
Projected exports CAGR: 15%–18%
Hot segments: EV components

Textile & apparel: $95–$110B
Projected exports CAGR: 13%–16%
Hot segments: man-made fibers, technical textiles

“To capitalise on this opportunity, Indian companies should focus on having a clear export strategy, the right execution chops, the right partnerships for enabling exports, and an optimal capital expenditure (capex) efficiency focus to build manufacturing capacity,” the global consultancy firm said. (Financial Express)