India’s export performance faced a setback in FY 2024, with merchandise exports contracting by 3.1% year-on-year to US$ 437.1 billion impacted by factors such as lackluster global demand, geopolitical disruptions, and declining commodity prices. Exports from four of India’s top five exporting states saw contractions in FY 2024. Gujarat’s exports fell by 10% to US$ 134.4 billion, Maharashtra’s by 7.2% to US$ 67.2 billion, Karnataka’s by 4.7% to US$ 26.6 billion, and Uttar Pradesh’s by 5.1% to US$ 20.6 billion in FY 2024.
On the other hand, Tamil Nadu, India’s third largest exporting state, stood out for its export performance with exports reaching US$ 43.6 billion, marking a growth of 7.1% in FY 2024. The state’s share in India’s merchandise exports rose from 8.3% in FY 2022 to 10% in FY 2024. Unlike many other top performing states, Tamil Nadu’s export basket is dominated by industrial goods including high-tech goods which lead to high value addition and are relatively less impacted by commodity prices.
Over the years, Tamil Nadu has emerged as the leader in exports of several manufactured product categories. The state is the leading exporter of telecom instruments, with a share of about 44% in India’s total exports of the product group during FY 2024. Similarly, it was the leading exporter of, inter alia, cotton garments (40%), garments of other textiles (38%), motor vehicles (37%), auto components (32%), electronic machinery and equipment (32%), and leather footwear (48%) during FY 2024.
Besides the evident locational advantages that Tamil Nadu enjoys, there are several other favourable factors driving the growth of manufacturing and exports from the state. Tamil Nadu had 51 operational Special Economic Zones as on the close of the last financial year, the highest in the country. These clusters benefit from fiscal incentives, smooth movement of goods, efficient processes, and strong logistics. Several clusters in sectors with high export potential, namely, apparels, furniture, medical devices, electric vehicles, electronics, and footwear are at different stages of development in the state.
Tamil Nadu was ranked first in NITI Aayog’s Export Preparedness Index 2022, demonstrating excellent performance in the pillars of export promotion policy, institutional framework, export infrastructure, and transport connectivity. There is heavy emphasis laid on building robust infrastructure and smooth last mile connectivity across all the industrial zones.
The state was also among the top ranked states in the latest edition of NITI Aayog’s India Innovation Index. It has an R&D policy in place which aims at transforming the state into a knowledge-based economy by creating knowledge infrastructure including innovation clusters, hi-tech corridors, knowledge cities, research parks, and centres of excellence in sunrise sectors, among others. The state has also revamped its Startup and Innovation Policy with the aim of emerging as one of the top 20 global startup destinations by 2032.
Overall, Tamil Nadu’s export performance in FY 2024 vis a vis other states demonstrates that to accelerate export growth and withstand unprecedented shocks, it is imperative for states to diversify their export baskets, build manufacturing capabilities in high-value goods, invest in trade supporting infrastructure and focus on creating a knowledge-based economy.
[Footnote is a weekly column that discusses issues relating to Tamil Nadu]
(The author is an economist with India Exim Bank)