After independence, India embarked on a centralized, state-driven program of industrial development, with economic decision making power resting with government officials and policy makers in Delhi. However, after 1990 this pattern changed, and economic growth both accelerated and grew more diffuse in its spread. States found themselves with considerable room to develop their infrastructure, policies and drive economic development. Considerable literature exists on how different states and regions have fared economically, and the social and political implications of these changes. But today, we will be focused on how Indian states have interacted with the global economy, and participated in foreign trade.
India is still a minor player in world trade, although it has seen rapid growth in this area in the last decade and a half. In 1990, India’s share of exports in the world was only 0.5%, and this increased to 1.2% in 2009. In contrast, China’s share grew from 1.8% to 9.6% in the same time period. However, we will focus on exports from various states, since they do present a varied picture, and also reveal the relative strength and sophistication of industry and business across states.
Apart from trade in goods and services, the other major point of interface between Indians and global capital is via the export of labor and remittances. India has been a leading recipient of remittances for a number of years, with remittances reaching $ 70 billion in 2013-14. Like exports, remittances show a varied picture across states, revealing the differences in how well different states are connected with international recruiting networks.
We start with a state wise breakdown of total merchandise exports, seen in Table 1. Clearly, two states on the Indian West Coast, Maharashtra and Gujarat account for nearly 50% of exports from India. Together with the South Indian states, they produce about 75% of India’s merchandise exports. Despite more of India’s population residing in its Northern and Eastern states (65%), most of the economic dynamism is shown by states in the West and the South (35%).
In fact, over the last two decades the East’s share in exports has declined from 15% to 6.6%. We see clearly in such statistics, the roots of labour migration within India from East and North to the West and South.
By looking further at sectoral compositions of the exports, we can assess the relative strengths amongst the leading exporting states. We look at state export rankings for general manufactured wares, information technology goods, pharmaceuticals, transport equipment and petroleum products. Table 2 summarizes these rankings giving values of exports in each category from leading states in billions of dollars.
We see that Gujarat has used its geographical location to good effect and developed a major petroleum processing and petrochemicals manufacturing industry. In addition, the state has well developed textile and pharmaceutical industries. Maharashtra features in nearly all sectors as a leading state indicating its diversified industrial portfolio. In the IT goods sector, Maharashtra is the top state with the South Indian states following it. This might be surprising given that cities like Bengaluru, Hyderabad are perceived to be the bigger IT centres in India.
We now move to exports of services, which actually account for a large share (56%) of India’s exports than merchandise. Observing Table 3, we see that this is because most of the IT earnings for the South Indian cities come through IT service, not product exports. Haryana and UP also make an appearance because of the IT companies in Gurgaon and Noida. And even here, Maharashtra ranks second with Mumbai and Pune being leading software services centres.
Next up are remittances. Table 4 lists the leading states by remittances received. As many might have guessed, Kerala leads in this category, getting more than $13 billion dollars in remittances. In fact, remittances constitute about 35% of Kerala’s GDP, indicating a high dependence on such earnings. This blog had earlier referred to Dubai and other Middle Eastern cities as the ‘metro’ of Kerala. Interestingly, remittances also constitute a significant portion of the GDPs of Goa (19%) and Punjab (13%).
Observing Punjabi cinema, one notices that a large number of Punjabi movies and songs feature a protagonist with rural Punjabi roots moving abroad to economic centres in the West. Such cinema appears to be grounded in the actual movement of Punjabi labour to markets in the West. Comparing with Haryana, however we see a clear difference, Haryana’s economic growth has been driven by establishing industry for domestic and international consumption, leveraging its proximity to Delhi. Punjab on the other hand has relied on its diasporic networks to export labour abroad.
Clearly Maharashtra, Gujarat and Kerala, all on the west coast of India are the states most tied to the global economy. Particularly in the case of Maharashtra and Gujarat, their established lead in industrialization and international contacts should help create a lasting period of economic growth.