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The Trade Numerologist: The case for India
No nation's potential prospects for persistent prosperity stirs shipping lines, traders and global miners and manufacturers more than India's. It's the planet's second-most populous place, with 1.3 billion people, and has abundant untapped intellectual, financial and geographical capital. Its population is young; its people save and invest. Gross domestic product in 2017 was well over $2 trillion, and is growing over 7% a year.
Shipping lines are especially optimistic. India has a 4,700-mile coastline, hundreds of ports, and over 90% of India's trade by volume goes in and out by boat.
And yet, India is merely the world's 13th biggest importer, sandwiched between Mexico and Belgium, and its 18th biggest exporter, set between Taiwan and Spain, according to IHS Markit's Global Trade Atlas. Kandla, Paradip and Mumbai see only a fraction of the activity that China's big ports do. China has six of the world's ten busiest container ports, while Mumbai, India's biggest, comes in at 29th.
A big part of this untapped potential is India's own fault, although, as its leader rightly point out, it's still overcoming hurdles set up by British colonial bureaucrats.
Shippers complain that moving anything in and out of the country requires hefty paperwork. Politically, it has favored socialist governments who have maintained high import and export taxes. In addition, India has 36 states and territories, all of which have their own regulations and tax rules. The government has occasionally set up export hurdles to keep domestic prices down and Indian consumers happy. Even the European Union, which keeps its card close to its chest, says that trading in India "remains comparatively restrictive."
However, India has steered its economy through waves of liberalization since the early 1990s. During the Doha Round of world trade talks last decade, India was considered one of the new power brokers, along with Brazil and China. Exports dipped the last couple years, but they're up this year, and analysts say the pro-business policies of Narendra Modi's government, in power since 2014, should help maintain the trend.
Indian exports, Jan.-Aug., 2007-2017
|2017||$191.8 billion||2011||$208 billion|
|2016||$174.2 billion||2010||$138.8 billion|
|2015||$182.4 billion||2009||$104.2 billion|
|2014||$214.3 billion||2008||$140.5 billion|
|2013||$208.9 billion||2007||$94.7 billion|
In October, the World Bank announced it was moving India up to 100th from 130th in its ease of doing business index. India has typically been ranked by experts as one of the world countries in the world for getting building permits and enforcing contracts. Despite improvements, it's still not an easy place to make, market and sell. "The number of procedures is still cumbersome for local entrepreneurs who still need to go through 12 procedures to start a business in Mumbai, which is considerably more than in OECD high-income economies, where it takes five procedures on average, the bank said.
One thing Indian officials are keen to do is diversify trade routes, and get more ships headed to the world's biggest ports, like Los Angeles, Rotterdam, and Chongqing. Instead, the logistics and shipping companies that serve India have niches carved out in smaller markets. Among India's top ten export destinations are the United Arab Emirates, Singapore, Vietnam and Belgium.
Top Indian export destinations, Jan.-Aug., 2017
|US||$191.8 billion||UK||$208 billion|
|UAE||$174.2 billion||Germany||$138.8 billion|
|Hong Kong||$182.4 billion||Vietnam||$104.2 billion|
|China||$214.3 billion||Bangladesh||$140.5 billion|
|Singapore||$208.9 billion||Belgium||$94.7 billion|
One area of concern for Indian trade officials is that it's not making the most of its proximity to China, the world's other billion-people-plus consumer market. India's largest exports to China last year were cotton, iron ore and organic chemicals. Shipments last year fell for the fifth year in a row.
Indian exports to China, 2011-2016
India ran a $97 billion trade deficit in the first eight months of 2017, and Indian officials are interested in balancing their trade accounts. The country is particularly dependent on energy imports, shipping in $77.3 billion of oil and gas during the first eight months of 2017.
The sector that appears most integrated in the world economy is India's vibrant $45 billion precious metals industry. Gold and precious stones are part of the country's culture, traded among hundreds of thousands of small jewelry stores. It's also a key trading hub, a stopping off point in the slow migration of gold from West to East.
India's biggest exports categories, Jan.-Aug., 2017
|Precious metals, stones||$28 billion||Pharmaceuticals||$8.3 billion|
|Oil and gas||$20.4 billion||Iron and steel||$7.5 billion|
|Nuclear parts, machinery||$10.5 billion||Clothes, apparel||$6.7 billion|
|Cars, trucks||$10.4 billion||Knit, crochet apparel||$5.9 billion|
|Organic chemicals||$8.4 billion||TV, sounds equipment||$5.7 billion|
India is one of the world's biggest agricultural producers, and its officials are looking at stimulating exports of rice, sugarcane and cotton. Other promising areas of export growth are silk, groundnuts, pharmaceuticals, and electronics.
To be sure, it's possible that trade in services not goods will be India's calling card in the global economy. India has one of the world's biggest service sectors - over 55% of the economy, and growing around 10% a year - with booming call, customer service and IT companies serving areas from Silicon Valley to Sicily.
What topic would you like the Trade Numerologist to cover? Email firstname.lastname@example.org with comments and questions.
The Trade Numerologist is IHS Markit's unique weekly look at global trade by award-winning journalist John W. Miller, formerly of the Wall Street Journal, using proprietary numbers from IHS Markit's Global Trade Atlas database, the world's most complete and accurate set of trade numbers.
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