Archive · 5 Nov 2025
India's Export Struggles: Why Growth Lagged Asian Neighbors
Imagine you have lots of helpers who are good at making simple things, like shirts or shoes.
Countries like Korea and China got really good at making these things for people all over the world, which made their economies grow very fast.
India has many, many helpers, but it hasn't become as good at making and selling these simple things.
The article says this is because it's sometimes hard for businesses to hire and fire workers in India, electricity can be expensive, and many young people spend years trying to get a government job instead of working in factories.
While India is doing well making complicated tech and services, it missed out on becoming a major maker of everyday items that lots of people could afford, unlike its neighbors.
India's export growth in sectors like apparel and footwear has lagged behind that of East Asian economic powerhouses like Korea.
Authors Kapur and Subramanian argue that India's large low-skilled workforce should translate to greater global export share than its current 4.5%.
Government policies, including labor market rigidities, industry reservations, and power supply issues, are cited as significant hindrances to export competitiveness.
India has seen success in high-skilled manufacturing and services, but this has not been mirrored in labor-intensive industries where competitors have thrived.
Despite global shifts away from Chinese manufacturing, India has not captured a larger share of the clothing export market, while countries like Vietnam and Bangladesh have gained.
- Who
- Authors Devesh Kapur and Arvind Subramanian, referencing observations from former Financial Times correspondent
- What
- Analysis of why India has not achieved the export-led growth success seen in other East Asian nations, particularly in labor-intensive sectors like clothing and footwear.
- When
- Refers to historical economic periods, including post-war Asia, the late 1970s, post-1980, and post-1991 reforms, with current analysis contrasting with competitors' trends post-2010.
- Where
- India, contrasted with East Asian economies like Korea, and competitors such as China, Vietnam, and Bangladesh.
- Why
- Multiple factors cited, including government policies (labor flexibility, industry reservations, power supply), a focus on high-skilled services over low-skilled manufacturing, an inefficient job market, and currency management.
Arguments for India's Export Lag
Counterarguments and Nuances
Labor Cost and Competitiveness
Arguments for India's Export Lag
India's large, low-skilled labor force should make its products competitive, but its share of global exports is significantly lower than its population size would suggest.
Counterarguments and Nuances
Despite a large labor force, India's labor-intensive exports have struggled. Garment exporters find labor cheaper in Bangladesh, and India's policies may be making its unskilled labor an economically expensive resource.
Government Policies and Regulations
Arguments for India's Export Lag
Government policies, such as restrictions on employer's ability to reduce workforce, reservations for small-scale industries, uncertain power supply, and expensive electricity, have hampered competitiveness.
Counterarguments and Nuances
The article notes that in contrast to China, where government policy significantly raised wages after labor unrest, India's share of clothing exports remained stagnant while competitors like Vietnam and Bangladesh saw growth.
Focus on Services vs. Manufacturing
Arguments for India's Export Lag
India's success in service exports and high-skilled manufacturing contrasts sharply with its poor performance in low-skilled manufacturing, suggesting a focus on a different economic model.
Counterarguments and Nuances
The success of high-skilled exports indicates India's potential and its ability to benefit from post-1991 dynamism, but this has not translated to the labor-intensive sectors where other Asian powerhouses thrived.
- Kapur and Subramanian's Book
- A Sixth of Humanity
- Korea's Apparel Growth (post-1962)
- 30% annualized
- Korea's Footwear Growth (post-1962)
- 70% annualized
- India's Apparel Growth (post-1980)
- 12.7% annualized
- India's Footwear Growth (post-1980)
- 5.4% annualized
- India's Global Export Share
- 4.5% (compared to potential 22.5%)
- Unfulfilled Workforce Potential
- 18% of workforce (approx. 100 million people)
- Government Job Aspirants Annually
- Tens of millions competing for 500,000 jobs