The employment dividend from exports

Synopsis: The surge in some export sectors has the potential to address India’s urban jobs challenge with necessary policy intervention.

Introduction

The share of exports in India’s gross domestic product has seen a steady decline to about 11% during the last ten years.

But for the current year, India’s exports of merchandise goods are booming. In the first five months of 2021-22, exports were 67% higher.

More importantly, exports of $164 billion in April-August 2021 were 23% more than those in the same months of 2019. Such healthy growth rates in India’s exports have not been seen for more than a decade.

Also, there is recovery in exports of India’s merchandise goods exports. India’s exports have benefited from the global price increase for petroleum products.

What are some key takeaways from the current export growth?

Growing footprint of China in India’s exports basket: India’s exports to China have been rising at a healthy pace. In a post-pandemic world, China has pushed out the United Arab Emirates to become India’s second biggest export destination, after the United States.

Lukewarm exports recovery of Indian automobile industry: Exports of motor vehicles and cars had almost collapsed. The big question is whether the export engine for the automobile industry (which accounts for a good chunk of manufacturing) would increase in the coming days.

Recovery of a few employment-intensive sectors: For instance, pearls and precious stones have made a comeback. Similarly, exports of gold jewelry have also recovered, though it is yet to recover its pre-pandemic share. Thousands of workers are engaged in these sectors and the pick-up in its exports should signal the return of jobs.

Exports of readymade cotton garments have also improved. They have already acquired a share of 3.7% in total exports, and it appears that if the trend continues, they could increase their share in India’s larger export basket.

All the sectors benefiting from an exports surge can create jobs, particularly in urban India. Policymakers, therefore, cannot afford to lose this opportunity.

Source: This post is based on the article “The employment dividend from exports” published in Business Standard on 8^th September 2021.