India: The World's Fifth Largest Exporter By 2030?

India could be the world’s fastest growing exporter between 2014 and 2030, moving from the 14th largest exporter of goods by value to the world’s 5th largest, says a HSBC global trade report published today.

India’s economy may be facing weak near-term prospects – the economy has expanded by less than 5% for the past two consecutive years – thanks to weak domestic demand. But HSBC believes that capital and skill-intensive exports like pharmaceuticals will soon become top contributors to India’s export markets.

“Despite struggling with a number of structural impediments to growth, prospects for medium-term growth in trade remain strong,” the HSBC report said.

In particular, India could see exports of transport equipment to increase by close to 15% a year through 2030 thanks to the presence of many global car companies setting shop in the country. Due to favorable government policies for the textile industry, India’s textiles exports could increase by 12% a year in the same time period.

The rosy forecast for India is yet another reminder of how emerging Asian markets such as China and India are revving up the export engine and leaving more developed countries in the dust.

Of the six countries expected to see the fastest export growth between 2014 and 2030, five of them hail from Asia with 8 to 11 percent average growth per year. These countries are: Vietnam, China, India, Malaysia and Indonesia. Meanwhile, average growth from Japan, the lowest-performing in the 25-country study, will only rise by an average of 6 percent each year.

“Increased economic competition from emerging markets implies the need for developed markets to continue to move up the product chain in order to maintain their export growth potential,” the report noted.

HSBC also predicts even deeper trade ties with Asian emerging markets over the next few years. China and India – along with Vietnam – will be the fastest-growing suppliers of U.S. imports, and imports from China will account for about one-fifths of all U.S. exports by 2020.

The good news for the U.S.? Booming emerging markets equals rising middle class incomes and robust population growth, making these competitors also consumers as well. In the U.S., HSBC highlights two areas with strong growth potential: energy and healthcare.

“Emerging markets that don’t have refining capabilities or don’t dispose of energy reserves could represent a major opportunity for U.S. energy exporters,” said HSBC’s Derrick Ragland, executive vice president and head of U.S. middle market corporate banking in the U.S. The report notes that unconventional oil and gas products will help lift U.S. energy by about five percent a year through 2030.

U.S. pharmaceutical exports are also expected to grow by nearly 8 percent a year through 2030. It’ll face strong competition abroad, though—India, for instance, is expected to grow its capital and skill-intensive sectors, including pharma production. (which is set to grow by close to an average of 12 percent per year through 2030)

More tidbits from the report:

- U.S. exports to China and India stand to grow an average nine percent each through 2030.

- Korea is also projected to rank among the top five export destinations for the U.S. by 2030, while Japan will fall from the ranks.
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- China’s share of world exports is projected to climb from 18 percent in 2013 to 29 percent by 2030, accounting for a third of the anticipated increase in global trade over the period.

- To U.S. business leaders surveyed, India replaced Japan as the second most promising Asian market for business expansion, coming right after China.

- 42 percent of respondents saw Asia as having the best opportunity for business growth in the next six months.