Will China remain the world's largest exporter with India becoming a game changer? 

Will China remain the world's largest exporter with India becoming a game changer? 

In August 2022, Indian maritime imports of festival items and accessories to the USA reached $20 million, nearly tripling their value from the same time the year before. India, which many people think has the opportunity to overtake China as the world's largest exporter, is now among the TOP 5 countries sending t-shirts and holiday decorations to the USA.

Experts anticipate that the pattern of growing bilateral trade with the United States will resume in the future years, as New Delhi and Washington continue to strengthen their economic connections. 

According to Khalid Khan, vice president of the Federation of Indian Export Organizations (FIEO), "India is growing as a trustworthy trade partner, especially after the Lockdown mandated by China". He also added: “Bilateral trade between India and the United States will expand in the future years. As India has joined a US-led initiative to establish an Indo-Pacific Economic Framework (IPEF), which would promote  economic relations even further.”

According to US customs statistics, maritime exports of carnival items and accessories to the USA reached $20 million in August 2022, nearly tripling the value from August 2021. With importers diversifying their supply sources in response to growing labor costs and interruptions by China's Covid-zero policy, India emerged as the obvious winner over the Philippines in this scenario. 

Amit Malhotra, whose Asian Handicrafts company sells Christmas decorations to major corporations including the Walt Disney Co., is one of the recipients of the early Christmas decorations orders. He stated that “Exports this year are up 20% from 2021 and that helped increase the production output.” 

According to Malhotra, "In 2022, we have exported over 3.2 million items of decoration, compared to 2.5 million the year before. Even though China exports a sizable portion of Christmas decoration items, a lot of first-time clients have just begun contacting us”

The demand is not only for Christmas items. The third-largest economy in Asia has experienced a marked rise in orders from the United States and Europe, with the change centered on labor-intensive, low-cost industries including garments, craft works, and non-electronic products.

According to Rakesh Mohan Joshi, director of the Indian Institute of Plantation Management (IIPM), India has 1.39 billion people and is the world's third-largest consumer market and the fastest developing market economy. The unique demographic dividend creates significant prospects for transferring knowledge, technology, manufacturing, commerce, and investment for US and Indian businesses.

"Other major export items from India to the US cover polished diamonds, pharmaceutical products, jewelry, light oils, and frozen shrimp" Joshi clarified. "Other major imports from the US include petroleum, rough diamonds, liquefied natural gas, gold, coal, almonds‌, waste and scrap."

While supply chain diversification started as a result of the US-China trade war early in 2018, India hadn't made any significant progress at that time as states like Vietnam had dominated the majority of the orders that were shifting away from Beijing. 

The COVID Outbreak, which prompted China to impose mandatory lockdowns, is contributing to this transition toward Indian markets. Today, India's exports of products, which totaled $420 billion in the fiscal year that ended in March 2022, have already reached over half of that level by August 2022, in only five months. That is, India maintains a trade surplus with only a few countries, including the United States. In 2021-22, India had a trade surplus with the United States of $32.8 billion.

Analysts consider it to be a fair place to start for India, the largest economy on the subcontinent, which is now expanding at the fastest rate in the world, even if it is barely comparable to China's yearly $3.36 trillion of exports. 

Taiwan, the EU, the US, and Japan are all willing to give India a further look, according to Alex Capri, a research fellow at the Hinrich Foundation, which was founded by US businessman Merle Hinrich to support ethical international trade. According to Indian government data, exports of Christmas decorations rose by more than 54% from the fiscal year 2020 levels, while exports of craftwork increased by about 32% over the same period.

According to Siddharth Jain, a partner in Kearney's operations and performance group, China's ongoing lockdown policy gives an opportunity for India to increase its investment in longer-term competitiveness and target "likely to win" fields. 

According to research by Kearney and the World Economic Forum, India is expected to have the most plentiful labor force in the world by 2030 and might contribute more than $500 billion yearly to the international economy. 

We have begun to witness the tidings with India’s exports in FY22 reaching around $420 billion so far, much higher than earlier years,” Jain said. "A combination of international and domestic causes were responsible for this to happen"

In order to be among the top 5 exporters of cotton t-shirts to the United States this year, India also exceeded El Salvador. According to Gautam Nair, managing director of Matrix Clothing Pvt., the apparel sector, for which India competes with countries such as Bangladesh, has seen an increase due to a number of variables, including a restriction on all cotton products from China's Xinjiang region over an accusation of ill-treatment of its Uighur Muslim minority. "The spike was further amplified by a significant increase in purchases and supply chain diversification. The orders from medium and big export enterprises increased by 30%-40% last fiscal year, and the upsurge would be more noticeable in the current fiscal year ending March 2023”, according to Nair.

Matrix Clothing, which sells clothing to major brands such as Superdry, Ralph Lauren, Timberland, and Napapijri, saw orders increase by 45% last fiscal year as compared to the pre-covid year.

Analysts warn that some challenges persist in Indian manufacturing such as the non-labor costs which are a barrier to the expansion of low-value-added production. “The major challenges are the legacy issues of contract enforcement, tax openness, and so forth," said Priyanka Kishore, an Oxford Economics analyst. "These issues definitely represent a hurdle to India's manufacturing goals and must be tackled if the economy is to fully reach its full potential as a manufacturing center."

In the end, despite the challenges, according to the data presented above, China was India's biggest trading partner from 2013-14 through 2017-18, as well as in 2020-21. However, this year's export figures reveal that the United States will overtake China as India's largest trade partner in 2021-22. before China, the UAE was the country's most important trade partner. The UAE was India's third largest trading partner in 2021-22, at a $72.9 billion trade value. It was followed by Saudi Arabia, which had a trade value of $42,85 billion.
Given that transformation in global trading patterns; What do you think? Can the UAE benefit from that change? Share your thoughts with your network on social media and  mention Vervo Middle East!
1. Article: As India makes headway in exports to the US, can it be the next China? - Business Standard  

2. Article: Can India replace China as the world’s factory? - Live Mint News

3. Database: Press Release India’s Merchandise Trade: Preliminary Data March 2022 – Ministry of Commerce and Industry

4. Chart: Exports in India decreased to 33 USD Billion in August from 36.27 USD Billion in July of 2022. - Trading Economics

5. Article: India's Exports Jump 27% to $235 billion During January-June: Official Data— News 18

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