India’s export performance appears robust at the aggregate level, even as the rupee weakens and places the country among Asia’s poorer-performing currencies. But beneath these headline numbers lies a far more uneven and structurally significant story. A closer reading of subnational data reveals that India’s export engine is increasingly concentrated in a handful of States, raising questions about whether exports still function as a tool of broad-based development or have become a reflection of pre-existing economic strength.
What the State-level data reveals
An examination of the ’s “Handbook of Statistics on Indian States 2024–25” shows a clear divergence in export performance across regions. Five States — Maharashtra, Gujarat, Tamil Nadu, Karnataka, and Uttar Pradesh — now account for nearly 70% of India’s total exports. Just five years ago, their combined share was closer to 65%.
This growing concentration means that national export averages increasingly mask a widening regional imbalance. Rather than lagging regions catching up, India’s export geography is hardening into a core–periphery structure, with a shrinking coastal-industrial core and a vast hinterland that remains weakly integrated into global trade.
A rising concentration problem
In technical terms, India’s export geography is becoming more concentrated, as reflected in a rising Herfindahl–Hirschman Index (HHI), a standard measure of concentration. Firms are clustering spatially to exploit logistics, supplier networks, and skilled labour pools, instead of dispersing to newer regions.
Southern and western coastal belts are integrating more deeply into global supply chains, while large parts of northern and eastern India — despite their demographic weight — are effectively decoupling from the export-led growth process.
Global trade constraints and shrinking space for late industrialisers
This divergence cannot be explained by domestic policy alone. The global trading environment itself has changed. The era when low-skill, labour-intensive manufacturing provided an easy entry point into global markets — as seen in Bangladesh or Vietnam — is narrowing. Data from the indicate that global merchandise trade volume growth has structurally slowed to a range of 0.5–3%.
At the same time, estimates from the UN Trade and Development’s 2023 report show that the top 10 exporters control about 55% of global merchandise trade. In such an environment, global capital is no longer driven primarily by cheap labour, but by economic complexity — the ability to produce diversified, technologically sophisticated goods.
Economic complexity and the problem of upgrading
Research on economic complexity shows that regions with dense and diverse export baskets can more easily move into higher-value activities. Sophisticated products such as machinery or automotive components cluster in tightly connected “core” areas of the product space, enabling incremental technological upgrading.
By contrast, regions whose exports lie in sparse, peripheral product spaces face steep barriers to diversification. Many low-export Indian States fall into this trap: they lack the industrial capabilities, logistics ecosystems, and skilled workforce needed to enter complex global value chains, making convergence increasingly difficult.
The broken link between exports and jobs
Perhaps the most significant structural shift is the weakening link between export growth and employment. For decades, development theory assumed that export expansion would absorb surplus labour and facilitate the transition from agriculture to industry. That assumption is now under strain.
Data from the Annual Survey of Industries 2022–23 show that fixed capital investment grew by about 10.6%, while employment rose by only 7.4%. Fixed capital per worker has increased to around ₹23.6 lakh, signalling capital deepening rather than labour absorption. India is exporting value, not large volumes of employment.
Labour market evidence of capital bias
Household-level data from the reinforce this trend. Despite record export values, manufacturing’s share in total employment has stagnated at around 11.6–12%. The elasticity of employment with respect to export growth has weakened sharply.
Moreover, ASI data point to a declining wage share in Net Value Added, especially in automated sectors such as petrochemicals and electronics. Productivity gains increasingly accrue to capital owners rather than workers, explaining why high industrial growth in export-heavy States has not translated into mass prosperity.
Spatial stickiness of new-age exports
Even policy-driven successes, such as the Production Linked Incentive (PLI)–led surge in electronics exports, growing over 47% year-on-year, remain geographically concentrated. These exports are locked into specific industrial clusters like Kancheepuram or Noida, where logistics precision, supplier depth, and institutional capacity already exist. Such complexity makes replication in the hinterland extremely difficult.
Finance, state capacity, and the hinterland trap
The failure of poorer regions to converge is closely linked to financial and institutional constraints. RBI data on Credit–Deposit (CD) ratios provide a stark picture. Export-intensive States like Tamil Nadu and Andhra Pradesh often record CD ratios above 90%, indicating that local savings are recycled into local investment.
In contrast, States such as Bihar and eastern Uttar Pradesh have CD ratios below 50%, implying that savings mobilised locally are lent out elsewhere. This represents a form of internal capital flight, where the hinterland indirectly subsidises industrial growth in richer regions. Persistent deficits in human capital further limit these States’ ability to participate in high-complexity production.
Exports as outcome, not instrument
What emerges is a quiet but profound shift in India’s development dynamics. Exports are no longer acting as a lever of structural transformation; they are increasingly an outcome of prior structural capacity. States are not exporting their way into development — they are exporting because they are already developed enough to do so.
Treating export growth as a proxy for inclusive prosperity risks confusing outcomes with instruments. The danger for India is not missing trade opportunities, but relying on a metric that reflects accumulated advantages rather than future inclusion.
What to note for Prelims?
- Top five States account for nearly 70% of India’s exports.
- Rising export concentration measured through HHI.
- Manufacturing employment share stagnant at ~12%.
- High CD ratios in export hubs versus low ratios in hinterland States.
What to note for Mains?
- Analyse the core–periphery pattern in India’s export geography.
- Discuss why export growth is no longer labour-absorbing.
- Examine the role of economic complexity in regional divergence.
- Critically assess whether export-led growth can still drive inclusive development in India.
