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Indian exports: Strong potential

Apr 7, 2003

In a year of economic slowdown and poor stocks markets, India has managed to revive its exports considerably. In the period between April-February FY03, Indian exports have risen by nearly 17%. What is even more heartening is the fact that the boom in exports has happened in a year when the rupee has appreciated nearly 2.3% against the dollar.

A strong rupee essentially means that Indian exports are relatively more expensive than its competitors in the global arena. But India has bucked the trend as seen by the phenomenal growth in exports. The reasons are multi-fold. For one, while the rupee has gained against the dollar, it seems it has fallen compared to other major currencies in the world. For example, the Euro gained by nearly 17% against the dollar in the period between February and December 2002, which is far more than what the Indian rupee gained. Due to this, Indian exports looked more attractive so much so that merchandise exports from India to USA grew by nearly 21% in 2002 compared to 2001, rising from US$ 9.7 bn to US$ 11.8 bn.

Apart form this technical reason, the acceptability of Indian products has increased. Indian auto component manufacturers have made significant contribution to exports in FY03 mainly due to better quality and cheaper cost. In fact, many auto majors have set up base in India in order to source aggressively from the country due to its value proposition. India has also seen significant growth in services exports in FY03. This was mainly led by software services exports, which clocked a growth of nearly 30% compared to FY02.

Other sectors like cement and steel have also fuelled exports. For example, steel exports from India to US have grown by nearly 270% in 2002. Steel volume exports across the globe have risen by nearly 22% in the first nine months of FY03. Other sectors that have contributed significantly to this performance are diamonds/gold jewellery, textile items and pharmaceuticals.

So, going forward, what is in store for the Indian exports? Indian model for outsourcing is gaining more and more ground daily. International software majors are setting up their own outfits in the country, this will give further credence to the low-cost-high-quality Indian outsourcing model. The optimism is not only limited to software services but also to back office operations. India exports seem to have finally come of age.

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