• The fiscal year (FY) 2023 trade data unveils two trends in Merchandise exports of India.
• First is the decline in the share of pharmaceuticals and labour-intensive sectors such as apparel, leather, and marine products.
• Second is a modest increase in the share of electronics and machinery exports.
• Two trends will have a profound impact as they become more pronounced.

India''s Declining Global Market Share in Key Sectors

1. Decline in India''s Global Market Share

• • Indian presence in the global market has witnessed a decline in sectors such as apparel, leather, shoes, and marine products.
  • This decrease can be attributed to concerns primarily related to the quality of goods rather than pricing issues.

2. Apparel Sector Challenges

• • The apparel sector has been impacted significantly by this decline.
  • Exports in FY2023 fell below the levels achieved in FY2018, indicating a worrisome trend.
  • Factors contributing to this setback: challenges associated with importing high-quality fabric, inadequate attention given to non-cotton fashion apparel (which accounts for 70% of global trade), an inverted duty structure, and labour-related concerns.
  • Resolving these issues is of paramount importance, considering the apparel industry''s role as a major job creator.
  • The Apparel Sector must address sustainability concerns that are becoming increasingly critical.

Quality Challenges in Pharmaceutical, Aquaculture, and Tea Sectors

1. Quality Challenges in the Pharmaceutical Industry

• • The pharmaceutical industry faces significant quality challenges, where even a single instance of poor-quality cough syrup can greatly impact reputation and orders.
  • To maintain India''s position as the "Pharmacy of the world," it is important to prioritize resolving quality issues.
  •  Additionally, reducing dependency on imports of Active Pharmaceutical Ingredients (APIs) and Key Starting Materials (KSMs) from China is essential.
  • Rebuilding domestic manufacturing capabilities will enhance the industry''s resilience.

2. Quality Challenges in Aquaculture

• • Quality issues also affect Indian aquaculture products like shrimp and prawns.
  • Many countries reject these products due to the presence of Salmonella. This highlights a need for a robust internal system.
  • Quality checks within India will prevent rejections in foreign markets, preserving the reputation of Indian products and avoiding order losses.

3. Quality Challenges in Tea Sectors

• • The tea sector requires deregulation to foster growth.
  • Allowing more players to cultivate and sell tea will create a competitive environment.
  • Quality issues have impacted Indian tea exports, with reports of consignments being held due to phytosanitary issues and excessive pesticide levels.
  • Addressing these concerns is important to enhance the reputation of Indian tea in global markets.

4. Quality Challenges Across Sectors

• • To regain market share and maintain a positive global perception, the industry must tackle quality challenges across various sectors.
  • Ensuring stringent quality control measures and addressing specific issues will help restore confidence in Indian products.

5. Improving Market Share in Key Sectors

• • India has witnessed improvements in market share for sectors with initially low global presence.

6. Growth in Electronics, Telecom, Mobile Phones, and Machinery

• • Two key sectors that have shown a higher share in global trade are Electronics, Telecom, Mobile Phones, and Electrical Equipment, as well as Machinery.
  • This is an encouraging development considering the significant role these product groups play in global trade, which surpasses $6 trillion.
  • Historically, India''s share in these sectors has been low, but there has been gradual and decisive improvement in recent years.

Addressing the challenges:

1. Changing Shares and Focus on Deep Manufacturing

• • In 2015, India''s overall share in global merchandise trade was 1.8 per cent. However, its share in machinery and electronics was merely 0.75 per cent and 0.4 per cent, respectively.
  • Over the course of seven years, there has been a marginal yet significant improvement in these shares.
  • India should prioritize deep manufacturing instead of relying solely on assembly-led operations, to continue this improvement.

2. Mastering Component Manufacturing

• • The focus should shift towards mastering the manufacturing of components rather than mere assembly.
  • Example: the Production Linked Incentive Scheme should support the production of Electric Vehicle (EV) cells, Photovoltaic (PV) cells, and Printed Circuit Board Assembly (PCBA).
  • This emphasis on component manufacturing will contribute to India''s overall manufacturing capabilities.

3. Facilitating Industrial Labs and Reducing Dependence

• • To reduce dependence on imported machinery, the government may consider introducing a new PLI scheme to facilitate the establishment of industrial labs for reverse engineering industrial machinery used in various sectors.
  • This initiative would prove beneficial in textiles, mining, metalwork, and agriculture.

Challenges and Opportunities

• • India has observed an increased share in the export of petroleum products, rice, and sugar. However, careful navigation is required concerning World Trade Organisation (WTO) cases related to subsidised rice and sugar exports.
  • The iron and steel, as well as aluminium sectors, have shown an upward trajectory, but challenges remain due to the imposition of carbon taxes by the European Union (EU) and other countries.

Importance of Petroleum Products

• • Petroleum products have emerged as a crucial driver of overall merchandise exports of India, with significant growth witnessed in FY2023.
  • However, excluding petroleum products, India''s exports experienced a decline during the same period.
  • This highlights the importance of diversifying the export basket.

Resolving quality issues and focusing on deep manufacturing should remain top priorities for the government and the industry. These measures will ensure India''s competitiveness in the export market, even in the face of challenging global economic conditions.