Home > Politics > Policy > How exports drive domestic job growth

As the RCEP negotiations reach a conclusion, the sentiments about the free trade mega-deal remain divided in India. On one hand, there are fears of India’s trade deficit worsening once markets open to the Asia-Pacific. But, on the other hand, India risks losing out on benefits from participating in global value chains and new research suggests that this could well be the case because export growth is associated with greater employment.

In a new study, Garima Dhir and C. Veeramani ask if exports can lead to job creation, especially in the context of a global production sharing (GPS) where production processes are fragmented. With GPS, intermediate inputs cross borders several times during manufacturing which can lead to double-counting in official trade data. The authors suggest to measure the effects of exports on the economy, it’s important to consider the domestic value-added (DVA) content of exports.

They find that the DVA content of India’s aggregate exports increased significantly between 1999-00 and 2012-13 (from US$46 billion to US$295 billion, an annual growth rate of 17.7%). At the same time, the total number of jobs supported by Indian exports increased from about 34 million to 63 million, at a growth rate of 3.4% per annum. In fact, throughout the period, export-related jobs grew faster than that of total employment because of the scale and productivity benefits from participating in the global market.

The authors, however, note that while India’s involvement in GPS has indeed increased over the years, the level of its participation remains significantly lower than other countries in East Asia. This may partly explain why, despite its increased participation in GPS, India has not benefited from it the way China and other East Asian countries have.

Also read: Exports, global production sharing, and job creation in India

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