|Subject||Auto, Pharma Steal Show From Textiles And Jewellery In Export Mkt|
Bit by bit India’s export basket is tilting in favour of high value added sectors such as automobiles, pharmaceuticals and capital goods and away from traditional manufacturing exports such as textile and gems & jewellery. The latter now accounts for less than a quarter of India’s total merchandise exports (23.6%) down from 39.2% in FY13.
During the same period, the combined share of engineering goods including automobiles (transport equipment), capital goods, pharmaceuticals (including basic chemicals and cosmetics) increased to 30.7% from 26% in FY13 according to RBI data. In FY13, India exported $27 billion worth of chemicals, pharmaceuticals and cosmetics just a tad below textile and garments exports revenue of $27.5 billion.
Experts attribute this to the maturing of the Indian manufacturing and multinational setting-up base in India. “Exports mirror the shift in the Indian manufacturing with more and more companies moving towards higher value added and intellectual property driven products and services. The shift has been quickened by the entry of multinationals and the competitive pressure that they have brought on Indian companies,” says Kumar Kandaswami, country manufacturing industry leader for Deloitte in India.
The trend is likely to persist as competition intensifies in the domestic market and more sectors are exposed to global competition. “This is a positive development for India’s export story. We should aspire to export more value added and IP driven products so that exporters could command some premium in international market,” he says.
This is clearly visible in the automobiles and pharmaceuticals where Indian companies such as Bajaj Auto, TVS Motors, Hyundai Motors India, Cipla, Dr Reddy’s Lab, Sun Pharm and Lupin now get a large chunk on their revenues from exports.
In last ten years, the combined export of engineering goods including automobiles, capital goods, pharma, basic chemicals grew at a compounded annual growth rate of 21% faster than 19% growth recorded by all merchandise exports. Transport equipment was the star of the show growing at CAGR of 30% in dollar terms to reach $18.4 billion in FY13 making it country’s largest engineering exports. Total engineering exports during the period expanded at the rate of 21.9% per annum. Transport equipment (including aircraft and ships) now account for 6.1% of all exports against 2.5% a decade ago.
Similar buoyancy is visible in other engineering products such as machinery & equipment and electronic goods. In last decade exports of machinery and equipment grew at a CAGR of 22.4% in dollar terms to $15.2 billion in FY03 from $2 billion in FY03. Electronics exports expanded at the rate of 20.5% during the period to reach $8.1 billion last year.
Automotive exports would have been even higher if not for the global economic slowdown. Last fiscal, automotive exports declined by 13% as consumers across the globe cut down on big ticket purchases. A similar thing has happened in the aftermath of 2008 global financial crisis and automotive exports had declined sharply in FY10 but recovered subsequently.
“Automobile exports are highly sensitive to economic growth in the destination country. They grow faster than the overall basket in good times and fall during a downturn. Given the current economic sluggishness in key emerging markets including China automotive exports may remain subdued in the near term,” says Devendra Pant, head economist at India Ratings.
Pharmaceuticals exports however have been more consistent. Last year it grew by 18% to cross $10 billion. In last ten years, pharma exports have grown at a CAGR of 21.8% per annum and continue to outperform. Pharma share in total export basket increased by 15 basis points to 3.5% in the first six months of the current fiscal from around 3.35% in FY13.
Experts believe that a combination of rupee depreciation and rising sophistication of Indian manufacturing companies especially top one will continue to support high tech exports from India. “In past Indian manufacturers were constrained by lack of technology and exposure to global markets. The gap has filled a bit by recent acquisitions by Indian companies in Europe and North America that gives them access to technology besides markets. Many companies are augmenting it by scaling up in-house R&D and product development,” says Kandaswami.
Others however say a lot will depend on the global growth environment. “It’s tough to increase exports when world’s key economies are slowing down. And being discretionary in nature high end manufacturing exports suffer more than staples such as textile and agri products during downturn,” says Devendra.
Source : business-standard.com
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