Software Services & Petroleum dominate India’s Export & Import
Sai Krishna Muthyanolla
November 4, 2019
India’s
trade balance has been negative for most years. While Services dominate India’s
exports,  Petroleum makes up for a large
portion of India’s imports. Here is a detailed look at India’s export &
import story.
India’s trade balance, since independence has mostly been in deficit i.e. the value of imports exceeds the value of exports. Over the years, this difference has progressively widened barring few occasions where the defect had seen a declining trend.
Thelast two years (2017-18 & 2018-19) has seen an increase in the tradedeficit post a phase of 4 years (2013-17) where in the deficit was on thedecline. As observed in an earlier
story by Factly, the trade deficit is the major contributortowards the deficit in the current account of India’s Balance of Payments.
Whatare the components that cause this deficit in India’s Trade Balance? In thisstory we explore the various exports and imports of India and their trends.
Surplus
in trade of services is due to the higher exports in Software services
Inthe earlier
story, we have highlighted that the deficit in the tradebalance is due to the deficit balance in trade of goods, while trade ofservices is in surplus.
Asper the data
released by RBI in the ‘Handbook of Statistics on IndianEconomy’, over the past decade, the value of exports of services is more thanthe value of import of services. Furthermore, the surplus is in an increasingtrend over the decade. Import of services valued at ₹ 2,834 billion in 2009-10 have increased to ₹ 8,825 billion in 2018-19. During the same period theexports in services increased from ₹ 4,546 billion to ₹14,563 billion, thus widening the surplus in servicetrade.
Inspite of the increase in imports, the corresponding increase in exports haveensured that the trade in services has a surplus all through the past 10 years.However, not all services have a surplus. The surplus in the trade in servicesis largely due to the surplus of software services.
Softwareservices constitute the major share in the overall volume of trade in services.In the year 2009-10, the exports in software amounted to ₹ 2,353 billion while the imports were only ₹ 70 billion, contributing a surplus to the tune of ₹2,283 billion. In the year 2018-19, the value ofimport of software services increased to ₹ 405 billion, while the exports increased to ₹ 5,839 billion leaving a surplus of ₹ 5,433 billion.
Businessservices and Travel are the next largest components. The net value of trade inbusiness services has been in a deficit during 2009-13 and then moving intosurplus (2013-17, barring 2015-16) and then recording a deficit of ₹ 92 billion in 2018-19. Financial services and Transportationservices have also had inconsistent net value of trade over the past 10 years.
Onthe other hand, Travel services has recorded a consistent growth in the surplusof trade. In the year 2009-10, the value of imports in Travel services was ₹ 442 billion and that of exports was ₹ 560 billion i.e. surplus of ₹ 118 billion. After a consistent increase over theyears, in 2018-19, the value of exports is ₹ 1,991 billion with a surplus of ₹ 477 billion.
Engineering
goods, Petroleum Products, Gems & Jewellery among the highest value export
commodities.
Amongthe different commodities exported by India, Engineering Goods have the highestvalue. Along with having the highest gross value, they are also the commoditywith the highest growth over the past decade. Except for a blip in 2015-16, thetotal exports of Engineering goods have increased every year. In 2009-10,Exports of Engineering goods were valued at ₹1,595 billion which increased by more than 3.6 timesand in the year 2018-19 are valued at ₹ 5,841 billion.
Exportsof Petroleum products rank second and valued at ₹ 3,259 billion in 2018-19. During the year 2013-14,they reached their highest positive over the decade at ₹ 3,832 billion. After a sharp decline over next twoyears, they started with their recovery in 2016-17.
Exportof Gems & Jewellery has shown a steady and consistent increase and arecurrently the third highest valued exports at ₹ 2814 billion in 2018-19.
Organic& Inorganic Chemicals and Drug & Pharma complete the list of top fiveexport commodities of India.
Amongother top exports, export of RMG (Ready Made Garments) have more than doubledover the past 10 years. However, the highest was in year 2016-17. The exportshave increased last year after a fall in the previous year.
Aftera near flat growth in exports during 2014-18, the value of exports in Yarn& Handloom products have increased in 2018-19 with ₹784 billion. Plastic & Linoleum products have seena consistent increase in the exports over the decade.
Riceand Electronic goods are among the top 10 exported commodities and the growthin value of these exports have varied over the years.
Petroleum
(Crude & Products) account for a substantial portion of imports in India
Adecade back i.e. in 2009-10, Petroleum (crude & products) imports werevalued at ₹4,116 billion which constituted around 30.2% of the total Imports.
Theimport value of this commodity has consistently increased over the years withit valued at ₹9,862 billion in 2018-19. Petroleum (crude & products) has occupied a majorshare of the total imports all through the previous decade but the proportionhas varied during this time. In 2013-14, it reached the highest point with ashare of 36.7 % of the total imports of India. During that year, the value ofPetroleum imported was ₹9,978 billion. In the subsequent years, the value of Petroleum based imports hascome down in value which also resulted in the fall of its share. However, thelast two years has seen an increase in the total volume of petroleum beingimported.
Electronic
goods, Machinery and Gold among the other top imported commodities
Amongthe other key imports, the value of import of Electronic goods has increased by3.6 times over the last decade. In 2009-10, the value was ₹ 1055 billion which increased to ₹ 3881 billion in 2018-19. Further, the value hasconsistently increased every year. Machinery (Electrical & Non-electrical)is not only the third highest valued import but also has consistently increasedevery year.
Thenext highest import commodity is Gold, which valued at ₹ 2294 billion in 2018-19 while it was ₹ 1358 billion in 2009-10. However, the highest valueof Gold import was in 2012-13 at ₹ 2921 billion. The value of Gold imports has beeninconsistent over the decade but has seen an increase since the last two years.
Thevalue of import of Pearls, Precious and Non-Precious stones over the last 3years has been higher than the earlier years of this decade. Coal, TransportEquipment, Iron & Steel, Chemicals, Resins & Plastics all have morethan doubled up in the value of their respective imports over the decade.
Increase
export of software products & other services can help bridge the balance of
trade deficit.
Asseen from the data, Petroleum (Crude & Products) occupy the major chunk ofimports, averaging about a quarter of the total imports during major part ofthe last decade. It is used for direct consumption as well as for manufactureof other products. Being a key source of energy, it plays a critical role inIndia’s commercial activity. Unless alternate solutions are found &domestic production increased, the import of petroleum will continue toincrease. Similarly, most of the other top imports – machinery, coal, transportequipment, chemicals, Iron & Steel, Resin etc. are used as raw materialsfor various industries aiding the commercial activity. A larger portion of importsof Gold & Precious/Semi-precious stones goes into export of finishedJewellery.  Hence apart from the Electronicgoods, most of the other top imports are used for further commercial activity.
Areduction in these imports, as indicated in the earlier
story might not be feasible unless alternatives are found.
Onthe other hand, increasing the export of services may help in balancing thevalue of imports and thereby the trade deficit. However as highlighted in thestory, most of the exports do not matchup to the higher value of imports.
Focusing on specific industries like Software, Engineering goods, Gems & Jewellery etc. where India has expertise could yield better results.
Featured Image: India’s trade balance