Looking at India’s Engineering Exports: Stuck in the Middle of the Value Chain

The engineeringEngineering sector is not only the largest segment of the Indian manufacturingManufacturing industry but also the largest net foreign exchangeNet foreign exchange earner. However, the sector has seen increasing import dependenceImport dependence, and domesticDomestic players have lost market shareMarket share both in domestic and global marketsMarket. In this context, this paper looks at the changing pattern of exportsExports of India’s engineering goodsEngineering goods sector and attempts to identify products with most export potentialExport potential. We find that though intermediate and capital goodsCapital goods mostly drive Indian engineering exports, India also has an increasing trade deficitTrade deficit in these goods. The analysis of export competitivenessExport competitiveness reveals a strong negative relationshipRelationship between India’s competitiveness and global market sizeGlobal market size, i.e., India is not competitiveCompetitive in those products with large marketMarket size and vice versa. Though the two-way trade in intermediate goodsIntermediate goods is an indicator of integration to global value chainsGlobal value chains, the strong global market presence in resource-intensive low-value addedValue added goods and the extremely limited final goodsFinal goods exportsExports suggests that India is struggling to develop competitiveness in high-value adding segments of engineering goodsEngineering goods. The governmentGovernment needs to shift its focus from the protection of intermediate goodsIntermediate goods towards improving domesticDomestic technological competence to increase domestic value additionDomestic value addition and export competitivenessExport competitiveness.