Syllabus: Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment.
Context and Core Argument
- Aggregate export growth masks deep regional concentration and structural divergence across Indian States.
- Export expansion no longer guarantees labour absorption or regional convergence.
- Exports increasingly reflect pre-existing industrial capacity, not a development pathway.
Geographical Concentration of Exports
- Five States — Maharashtra, Gujarat, Tamil Nadu, Karnataka, Uttar Pradesh — contribute nearly 70% of national exports.
- Their share rose from ~65% five years ago, indicating rising concentration.
- Herfindahl-Hirschman Index (HHI) for export geography is increasing, signalling dangerous agglomeration.
- Coastal western and southern States integrate into global supply chains, while northern and eastern regions lag.
- A hardened core–periphery pattern is replacing regional convergence.
Changing Global Trade Environment
- Global merchandise trade volume growth slowed to 0.5–3%, per WTO data.
- Top 10 exporters control ~55% of world merchandise trade (UNCTAD 2023).
- Capital now prioritises economic complexity, not low-cost labour.
- Regions with diverse, interconnected export baskets upgrade faster.
- Peripheral regions face entry barriers into high-value global value chains.
Capital-Intensive Export Growth
- Traditional link between exports and mass industrial employment has weakened.
- ASI 2022–23 shows fixed capital grew 10.6%, while employment rose only 7.4%.
- Fixed capital per worker increased to ₹23.6 lakh, reflecting capital deepening.
- India exports value without proportional employment, bypassing labour-intensive industrialisation.
Employment and Wage Implications
- Manufacturing employment stagnates at 11.6–12% of total workforce (PLFS).
- Employment elasticity of exports has collapsed, despite record export values.
- Wage share in Net Value Added declines as gains accrue to capital owners.
- High productivity sectors remain capital-biased, limiting mass prosperity.
Financial and Institutional Constraints
- Credit–Deposit ratios exceed 90% in export hubs like Tamil Nadu.
- Ratios below 50% in Bihar and eastern Uttar Pradesh indicate capital outflow.
- Hinterland savings finance coastal industrial growth, deepening inequality.
- Human capital deficits further restrict integration into complex value chains.
Implications for Development Strategy
- Exports are now an outcome of development, not its driver.
- Export growth is an inadequate proxy for inclusive prosperity.
- India must reassess open-economy metrics to avoid mistaking concentration for progress.