Electronics: India's export powerhouse for FY23

Bloomberg
Bloomberg

Summary

  • Electronic goods exports clocked $25.3 billion, rising a stunning 49% since 2021-22, even in a year when overall exports grew just 6.5%

India’s exports of electronic goods have stolen the march on other traditional commodities in the country’s export basket in 2022-23. Electronic goods exports clocked $25.3 billion, rising a stunning 49% since 2021-22, even in a year when overall exports grew just 6.5%. The category alone contributed around 30% of the total growth in exports, Mint calculations show.

Largely in FY23, the incipient global recession led to broader exports catching a cold, with four of the 12 months seeing negative or flat year-on-year growth. But electronics exports bucked this trend, rising in all months. The strong show led to the sector climbing to the sixth spot among goods exports categories—surging past ready-made garments for the first time—and to fourth spot in the manufacturing goods basket, shows an analysis of trade data. Electronic goods exports have jumped 152% since FY19.

 

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In its march ahead, the sector has gone past exports of key items like ferrous and non-ferrous metals, drug formulations and biologicals, textiles, readymade garments, and iron and steel. In FY23, exports of these categories stood at $23.3 billion, $19.5 billion, $18.1 billion, $16.2 billion, and $13.3 billion, respectively. The export value of all these items used to be higher than electronics exports till FY22, but no longer, indicating the soaring importance of electronics in India’s trade basket.

However, India still has a long way to go to catch up with other large electronics exporters. Exports account for only about 24% of India’s total electronics trade, and the sector runs the largest trade deficit among major export categories.

Smartphones Shine

THE GROWTH was primarily driven by higher mobile phone production and shipments. At $12.9 billion, the value of telecom-related shipments made up 51% of the electronics exports basket, and rose 75% from FY22. This is followed by exports of electronic components (16.5%). Exports of medical and scientific instruments held over 8% share.

“A spurt in electronics exports from India is partly attributed to major mobile equipment manufacturers setting up production units in India," said Barclays in a research report last month. Samsung, which operates the world’s largest smartphone factory in Noida, accounted for maximum shipments, followed by Oppo and Vivo, showed data from Counterpoint Research. “India’s smartphone exports were as low as $0.4 billion in FY14, even falling to nil the next year, but the ‘China plus one’ story, as well as the government’s production-linked incentive scheme, helped boost external shipments," an Emkay Global report in April said.

Country Competition

APART FROM a strong growth in value terms, India’s electronics trade has also seen a rejig in the country rankings of top export destinations in FY23. The US remained the top export destination for Indian electronics goods, with exports worth $6.2 billion, more than doubling during the year. The US was followed by the United Arab Emirates ($3.3 billion and 32% year-on-year growth) and the Netherlands ($1.8 billion, up 111%).

China—which was among the top three export destinations for India’s electronics goods in FY22—has seen its ranking fall to the eighth spot. A similar story plays out for Russia, whose ranking has slipped to 21st in FY23 from eighth in FY22. Austria jumped to the seventh spot in FY23 from 35th in FY22, with a whopping 771% surge in exports to the country. Other EU countries such as Italy, Czech Republic and France have also seen their rankings go up in stakes table compared with the year before.

Bigger Picture

ELECTRONICS HAS been the biggest beneficiary of the PLI scheme, cornering the lion’s share of incentives offered. While the exports surge portends well, fact is that India still has a lot of catching up to do. Imports are way higher at $79.7 billion. China remains the top exporter of electronic products, and India’s performance also pales against Asian peers such South Korea, Taiwan, and Malaysia.

“So far, India had not developed its domestic capabilities in these segments," said Ajay Sahai, chief executive officer of the Federation of Indian Export Organizations (FIEO). “But thanks to schemes like PLI, a lot of investments are going in the electronics segment starting with mobile phones and soon in white goods. In times to come, electronic components manufacturing will start in a big way."

nandita.venkatesan@livemint.com

(Pragya Srivastava contributed to this story.)

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