How exports are concentrated in few States, Pg8

Key Highlights:

• India's export engine is increasingly powered by a few states: Maharashtra, Gujarat, Tamil Nadu, Karnataka, and Uttar Pradesh, which now contribute nearly 70% of national exports.
• The Herfindahl-Hirschman Index (HHI) for India's export geography is rising, indicating increasing concentration and a "top-heavy" export structure.
• A shift from volume to value in global trade undermines the assumption that export expansion will automatically absorb surplus labor.
• Annual Survey of Industries (ASI) 2022-23 data shows fixed capital investment grew by 10.6%, while employment growth lagged at 7.4%.

Detailed Insights:

• India's trade geography is becoming increasingly lopsided, with coastal states in the south and west integrating more tightly into global supply chains, while the northern and eastern regions are decoupling.
• Global capital is now drawn to high economic complexity rather than just low-cost labor, disadvantaging regions with less diverse export baskets.
• The traditional link between export expansion and mass industrial employment is weakening due to capital deepening, where the ratio of capital to labor increases.
• The Periodic Labour Force Survey (PLFS) data indicates that the manufacturing sector's share of total employment has stagnated around 11.6%-12%, even as export values rise.
• The Credit-Deposit (CD) Ratio is high in export powerhouses like Tamil Nadu and Andhra Pradesh (above 90%) but low in hinterland states like Bihar and eastern Uttar Pradesh (below 50%).
• Export performance is increasingly a reflection of accumulated industrial wealth rather than a pathway toward building it, indicating a need to re-examine the role of an open economy in India’s development strategy.

Key Concepts Involved:

• Herfindahl-Hirschman Index (HHI): A measure of market concentration, calculated by summing the squares of the market shares of each firm in the industry.
• Capital Deepening: An increase in the ratio of capital to labor, leading to higher productivity but potentially lower employment growth.
• Credit-Deposit (CD) Ratio: The ratio of a bank's total loans to its total deposits, indicating how aggressively local savings are recycled into local industry.