Latest / International Business with Fexingo: Global Trade, Cross-Border Deals, and Multinational Operations / Why India Exports Are Surging While Global Trade Slows
Transcript
- Lucas: So the numbers this morning are pretty striking. The S&P 500 is down half a percent over the past five days, the Nasdaq lost one point five percent, but the real story is in emerging markets — the iShares Emerging Markets ETF, ticker e e m, dropped over four percent in the same period. South Korea's index, EWY, is down eleven percent. That's a brutal week for export-driven Asia. Luna: Yeah, but there's one country that's actually bucking the trend — and it's not China. India's export numbers have been quietly surging. Lucas: Exactly. And that's what I want to drill into today. Because while global trade is slowing — you look at South Korea, which is basically a bellwether for world demand, and its exports are plunging — India's goods exports hit a record four hundred fifty billion dollars last fiscal year. That's up about fifteen percent year-over-year. And it's not just a one-off. This has been building for a couple of years now. Luna: And you know, if these conversations have helped you think about your own work — whether it's investing or just understanding where global supply chains are heading — listener support is what keeps this show ad-free and independent. You can find us at buy me a coffee dot com slash fexingo. Lucas: Appreciate that. So what's driving this India export boom? The big structural factor is the China-plus-one sourcing strategy. Companies that were heavily reliant on China for manufacturing — especially in electronics and pharma — are actively building a second sourcing base. And India is the most obvious candidate for a lot of them. Luna: Right, and the Indian government has been pretty aggressive with incentives. The Production Linked Incentive scheme — PLI — covers fourteen sectors, from electronics to automobiles to specialty steel. It basically gives companies a cash subsidy if they ramp up domestic production and exports. Lucas: And it's working. Take smartphones. India exported about fifteen billion dollars worth of smartphones last year. That's up from basically nothing five years ago. Apple now assembles the iPhone fifteen and sixteen in India, and a big chunk of those devices are shipped to Europe and the Middle East. Foxconn and Wistron have huge factories outside Chennai and Bangalore. Luna: Pharmaceuticals is another one. India is the world's largest supplier of generic drugs, but exports have been growing at about ten percent annually. The PLI scheme for pharma specifically targets high-value products like active pharmaceutical ingredients — APIs — and complex generics. They want to move up the value chain. Lucas: And there's also engineering goods. India is now a major exporter of auto components, industrial machinery, and even defence equipment. The government has put up tariff barriers on imports to encourage domestic production, and then they offer export incentives on the same products. It's a classic mercantilist play — but it's working. Luna: That said, there are real risks. The rupee has been strengthening recently — it's at about 83 to the dollar, down from 87 a year ago. A stronger rupee makes Indian exports more expensive in global markets. And if global demand slows further, especially in Europe and the US, that could hit export orders. Lucas: Oil prices are another risk. India imports about eighty-five percent of its crude oil. Every ten-dollar increase in oil prices widens its trade deficit by about one point five percent of GDP. And with tensions in the Strait of Hormuz, oil prices are elevated. So the export boom is real, but it's happening alongside a widening trade deficit. Luna: And yet, the market seems to be rewarding India. The India ETF, ticker i n d a, is only down about one percent over the past week — much better than South Korea or Brazil. And foreign direct investment into India hit a record last year, over fifty billion dollars. Lucas: A lot of that FDI is going into manufacturing and infrastructure. The government is building industrial corridors, upgrading ports, and investing in logistics. The goal is to reduce the time it takes to export from India — which historically has been a pain point. Customs clearance, port congestion, trucking delays — they're tackling all of that. Luna: So the question is: can this momentum sustain? If the global economy tips into a recession, demand for Indian exports will fall. But the structural shift — companies diversifying away from China — that's not going to reverse. India is positioned to capture a bigger share of global manufacturing regardless of the cycle. Lucas: I think that's right. The China-plus-one trend is a multiyear, probably decadelong shift. Even if export growth slows next quarter, the long-term trajectory is up. India's share of global merchandise exports is still only about two percent. There's plenty of room to grow. Luna: And the government is doubling down. The new trade policy unveiled earlier this year targets two trillion dollars in total exports — goods and services combined — by 2030. That's ambitious, but if they keep up the reforms, it's not impossible. Lucas: Let's talk about services too, because India's services exports are massive — about three hundred fifty billion dollars a year. IT services, business process outsourcing, software — that's been the traditional strength. But now you're seeing engineering R&D services, biotech services, and even gaming and animation. The services surplus helps offset the goods trade deficit. Luna: So the picture is: goods exports booming but still with a deficit, services exports surging and in surplus. Overall, the current account deficit is manageable — about one point five percent of GDP. Not great, but not a crisis either. Lucas: And the rupee is being managed by the central bank. They've been intervening to prevent excessive volatility. They want a stable currency that supports exports without triggering inflation from imported goods. Luna: Alright, so to tie it all together: India is the bright spot in a darkening global trade landscape. The structural drivers — China-plus-one, PLI, infrastructure investment — are real. The risks — rupee strength, oil prices, global demand — are real too. But the direction of travel is clear. Lucas: Yeah, I think that's the takeaway. If you're watching global trade flows, India is the country to watch over the next five years. Not just for the headline export numbers, but for how it's reshaping supply chains in electronics, pharma, and engineering. And if the government stays the course, India could become a genuine manufacturing hub for the world. Luna: That's a big if in some ways — but the early returns are promising. Thanks for listening.