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India has no export superstars: Economic Survey explains what that means

31-Jan-2018
India has no export superstars: Economic Survey explains what that means

Export concentration by firms is much lower in India than in the US, Germany, Brazil, or Mexico. For example, the top 1 per cent of firms accounted for 72, 68, 67, and 55 percent of exports in Brazil, Germany, Mexico, and USA, respectively, but only 38 per cent in the case of India. 

The top 5 per cent accounted for 91, 86, 91, and 74 percent in those countries, compared with just 59 per cent in India. The top 25 per cent of firms accounted for 99, 98, 99, and 93 percent in those countries, as opposed to 82 per cent in India. 

"There is a growing literature that documents the emergence of exports superstars—firms that account for a disproportionately large share of exports. For example, in a sample of 32 countries, Freund and Pierola (2013) find that the top 1 percent of exporting firms account for over 50 per cent of exports," says the survey. "Further, it is argued that having and fostering bigness influences the sectoral composition of exports and also helps create comparative advantage and improve long-term prospects" 

However, the survey says, there is also a view that argues for the virtues of smallness, especially small and medium enterprises. 

Since firm-level export data were difficult to construct in India, no such analysis was done. But with the GST providing these numbers, it has come to light that India has very low concentration of exports when compared to many other countries. 

"There is one caveat which could help explain the atypical Indian distribution: unlike in other countries, Indian data includes exports of services, where concentration ratios tend to be much lower than in manufacturing. The implications of such an "egalitarian" Indian export structure are unclear," says the survey. 

The survey says superstars are dynamic and their expansion could have spillover effects on other firms, but concentration could have disadvantages, including impeding competition. 


Source:- Economictimes.indiatimes.com

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