India’s Export-Led Growth: Exemplar and Exception

Abstract

Two new facts motivate this long-run assessment of India’s exports and growth. First, since the early 1990s, India has posted the world’s third-highest growth rate in overall and manufacturing exports, which has been critical to India’s overall growth performance. Contrary to perception, India has been an exemplar of the export-led growth model. Second, this aggregate performance has, however, co-existed with an underperformance in unskilled manufacturing exports. This has resulted in at least $140 billion in “missing” unskilled economic activity annually. A cross-country gravity perspective suggests that India is a “normal” exporter and importer of goods and services, but an under-exporter of manufacturing goods. Going forward, India’s unusual, endowment-defying specialization could limit export dynamism. Having not traversed the Lewis curve for unskilled manufacturing, the curve for skilled exports is threatening to turn up as skilled labor becomes scarce.

Keywords: Globalization, Exports, Economic Development

JEL Classification: F6, O1