The World Bank has highlighted the need for India to pivot towards labour-intensive exports to boost employment, especially in light of missed opportunities from China’s exit from certain manufacturing sectors. This recommendation came during the release of the “India Development Update” report on Tuesday.
Auguste Tano Kouame, World Bank Country Director for India, emphasized the importance of targeting less advanced markets such as Africa and Latin America. According to Kouame, these regions represent significant untapped demand for Indian goods, particularly textiles and footwear.
While India has seen remarkable growth in high-tech exports, including mobile devices and services, it has lost market share in traditional low-skilled sectors like apparel, leather, and textiles. These sectors, which once thrived in India, have been increasingly dominated by Bangladesh and Vietnam, who have capitalized on China’s withdrawal from labour-intensive manufacturing. The report noted that India’s global share in apparel exports declined from 4% in 2018 to 3% in 2022, largely due to rising production costs and declining productivity.
Despite India emerging as the world’s fastest-growing major economy, with a 6.7% year-on-year growth in the April-June quarter, the country faces challenges in job creation and inclusive growth. The urban unemployment rate remains notably high, averaging 17%.
To address these issues, the World Bank suggested that India could attract more investors by offering incentives under the Production Linked Incentive (PLI) scheme. This would particularly benefit low-skilled manufacturing exports, which have the potential to create more jobs for the country’s youth. Additionally, the report recommended reducing import tariffs and better integrating into global value chains to enhance export growth.
In terms of economic outlook, the World Bank has revised its growth forecast for India upward to 7% for the current fiscal year, from an earlier estimate of 6.6%. This revision is supported by increased government spending on infrastructure, which is expected to fuel further economic expansion.
India’s total goods and services exports for the fiscal year 2023/24 exceeded $776 billion, while imports reached nearly $855 billion, reflecting the ongoing challenges and opportunities in the global trade landscape.