Concentrated of India’s Exports in Few States

Syllabus: GS3/ Economy

Context

• The RBI Handbook of Statistics on Indian States 2024–25 reveals that export growth is increasingly concentrated in a few developed coastal and industrial States, masking deep regional and employment-related challenges.

Pattern in India’s Exports

• Rising dominance of few States: The top 10 States now account for over 91 percent of India’s exports in FY25, up from 84 percent in FY22.
  • The top five States, Gujarat, Maharashtra, Tamil Nadu, Karnataka and Uttar Pradesh, together contribute nearly 70 percent of national exports.
• Regional divergence: Coastal western and southern States are integrating deeper into global supply chains.
  • Large parts of northern and eastern India are gradually decoupling from the trade engine.

Reasons Behind Export Concentration

• Infrastructure advantages: Coastal States benefit from ports, industrial corridors, multimodal logistics and proximity to global markets.
• Agglomeration economies: Established industrial ecosystems attract capital, skilled labour, suppliers and ancillary industries, reinforcing dominance.
• Shift from cost to complexity: Global capital increasingly favours regions with high economic complexity, diversified export baskets and strong institutional capacity.
• Global trade constraints: WTO data shows global merchandise trade growth slowing to 0.5–3 percent, while UNCTAD estimates suggest the top 10 exporters control around 55 percent of global trade.
  • This intensifies competition and favours already-integrated regions.
• Financial depth asymmetry: High-export States like Tamil Nadu and Andhra Pradesh record Credit–Deposit ratios above 90 percent, enabling local savings to fund local industry.

Impact of Export Concentration

• Regional inequality: Coastal western and southern States integrate deeper into global trade, while northern and eastern regions decouple.
• Fragile export resilience: Over-reliance on a few States and sectors heightens vulnerability to regional or sector-specific shocks.
• Limited job creation: Export growth no longer guarantees mass employment, weakening its role as a development lever.
• Fiscal and social stress: Persistent regional divergence strains cooperative federalism and inclusive growth objectives.

Government Initiatives to Improve Hinterland Export Competitiveness

• Districts as Export Hubs (DEH): It aims to transform each district into an export hub by focusing on infrastructure development (processing, testing, logistics) and capacity building of local producers.
  • It is integrated with One District One Product (ODOP) for decentralised and balanced export promotion.
• Export Promotion Mission (EPM) is India’s new, unified six-year program (FY 2025-2031) to explicitly prioritises;
  • Non-traditional districts and landlocked States.
  • Labour-intensive and MSME-driven exports.
• Agriculture Export Policy & APEDA Financial Assistance Scheme (FAS) targets agricultural and processed food exports from rural and inland areas.
• Towns of Export Excellence (TEE): Identifies towns with sector-specific export potential (handicrafts, handlooms, textiles, leather). It provides financial assistance, technical upgradation, skill development, and export marketing support.
• PM Gati Shakti National Master Plan & National Logistics Policy (NLP): It aims to reduce India’s logistics cost and improve trade efficiency. It benefits for hinterland regions with
  • Improved road, rail, inland waterway, and multimodal connectivity.
  • Development of dry ports, logistics parks and freight corridors.
  • Faster movement of goods from production centres to ports.

Way Ahead

• Strengthen district-level institutions, logistics, finance, and skill ecosystems to enable hinterland regions to enter medium- and high-complexity export value chains.
• Complement export growth targets with metrics on employment generation, regional dispersion, and value-chain integration to ensure inclusive and balanced trade-led development.

Source: TH