A Deep Dive into India’s Manufacturing Export Champions
The Big Question What separates successful Indian manufacturing exporters from those who stay local? And particularly, what drives success in high-technology sectors where India has traditionally struggled to compete globally?
Why This Matters Now
- India’s exports remain dominated by low-tech products despite its skilled workforce
- High-tech manufacturing could be a major growth engine for India’s economy
- Understanding success factors is crucial for policy and business strategy
- Global competition in manufacturing is intensifying
Key Findings: The Seven Drivers of Export Success
1. The Innovation Edge
- Companies doing their own R&D are far more successful exporters
- This is especially true in high-tech sectors
- Simply importing foreign technology isn’t enough – firms need to develop their own capabilities
2. The Size Sweet Spot
- Medium-sized firms tend to be the most successful exporters
- Too small = lack resources to compete globally
- Too large = become inefficient and less nimble
- Optimal size varies by industry:
- High-tech: ~₹903 crore
- Medium-tech: ~₹7,787 crore
- Low-tech: ~₹3,363 crore
3. The Global Connection
- Having international subsidiaries boosts export performance
- Creates valuable market intelligence and customer relationships
- Helps provide after-sales service in foreign markets
- Effect is consistent across all technology levels
4. The Raw Material Factor
- Access to imported raw materials is crucial
- Particularly important in knowledge-intensive industries
- Helps achieve global quality standards
- Creates connections to international supply chains
5. The Productivity Advantage
- More productive firms are more successful exporters
- Labor productivity especially important in medium and low-tech sectors
- In high-tech sectors, innovation matters more than pure efficiency
6. The Foreign Partnership Effect
- Foreign-owned firms generally export more
- Bring international networks and know-how
- Particularly strong effect in high-tech sectors
- But domestic firms can compete with right capabilities
7. The Reform Dividend
- Post-1991 economic reforms significantly boosted exports
- Reduced barriers and increased competitiveness
- Created more outward-looking business mindset
- Effect seen across all sectors
Practical Implications
For Business Leaders
- Invest in R&D and innovation capabilities
- Consider establishing overseas subsidiaries
- Focus on productivity improvement
- Build global supply chain relationships
For Policymakers
- Continue liberalization policies
- Support R&D investment
- Facilitate raw material imports
- Encourage international expansion of Indian firms
For Industry Groups
- Foster collaboration between domestic and foreign firms
- Share export market intelligence
- Support capability building in SMEs
- Promote quality and innovation
The Bottom Line Success in global markets, especially in high-tech sectors, requires:
- Building innovative capabilities
- Achieving efficient scale
- Establishing international presence
- Accessing quality inputs
- Driving productivity
- Learning from global partners
- Embracing competition
Academic Abstract:
The present study makes an attempt to identify factors that play important role in the export competitiveness of Indian manufacturing firms with particular emphasis on knowledge-based industries. The study finds that younger firms drive export competitiveness in the high technology and low technology sub-samples of Indian manufacturing whereas in the medium technology older firms are more competitive. Firm size is observed to have a non-linear impact on export performance largely represented by an inverted U-shape curve. It is also found that the firm’s own innovative activities are by far the most important technological factor contributing to the enhanced competitiveness whereas the import of foreign technology through technology contracts found to have detrimental effects on the export competitiveness in high technology and medium-high technology segments of Indian manufacturing. Access to foreign raw materials and inputs is also observed to be a critical factor for export success of Indian firms across technology segments. Another important variable that can be used to increase export competitiveness in high technology and low technology industries is encouraging Indian firms to establish subsidiaries abroad. Foreign affiliates in Indian manufacturing are found to achieve higher export success than domestic firms. The outward-looking policy initiated since 1991 had improved the export competitiveness of Indian manufacturing including technology-intensive segments.
Learn More:
Full citation: N. Kumar and Jaya Prakash Pradhan (2007), ‘Knowledge-based Exports from India: A Firm-level Analysis of Determinants’, in N. Kumar and K.J. Joseph (2007) (eds.) International Competitiveness & Knowledge-based Industries, pp. 53–96, New Delhi: Oxford University Press.
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