Structural Changes Since 1991: What India Buys and Sells

What rose.

• Engineering and transport: machinery and instruments 9.8 per cent, transport equipment 7.3, manufactures of metals 5.3, iron and steel 2.1. Together about a quarter of exports, against 11.9 per cent for the whole comparable group in 1990-91.
• Electronic goods, from nothing worth a line to 8.3 per cent, growing 31.5 per cent in 2024-25 and a further 47.0 per cent in the first half of 2025-26. This is the fastest moving item in the whole table.
• Petroleum products, from 2.9 per cent to 15.3 per cent. India imports crude oil, refines it and exports the products, which is why petroleum appears large on both sides of the account.
• Pharmaceuticals, small as a share but strategically important, and the Economic Survey notes drug formulations and biologicals as one of the three largest export items.

The pattern in a sentence a student can use: India's export basket has moved from what its poorest workers made to what its engineers and chemists make. That is a gain in value added and technology, and it is also why export growth has not created employment in proportion to its value, which is the subject of the criticism in the next chapter.

Imports: what changed and what did not

1990-91, in millions of dollars against total imports of 24,075:

2024-25, shares of total imports:

Three findings, and the first is the one nobody expects.

1. Petroleum's share is essentially unchanged: 25.0 per cent in 1990-91 and 25.8 per cent in 2024-25. Thirty four years of growth, diversification, refining capacity and a domestic exploration programme have not altered the proportion of India's import bill that goes on oil. That is the single most durable fact about India's external account, and it is why the current account is exposed to the price of crude, as [Disequilibrium in the Balance of Payments] explains.

2. Capital goods have halved, from 24.2 per cent to 12.3 per cent. In 1990-91 nearly a quarter of imports was machinery, because India was building an industrial base and could make very little of it. The fall is partly a success, since India now makes much of its own machinery, and partly a warning, since a falling share of capital goods in imports can also indicate weak investment.

3. Electronic goods have gone from no separate line to 13.7 per cent, the largest single item after fuel, and they are also the fastest growing export. India both imports and exports electronics on a large scale, which is what assembly within a global supply chain looks like: components come in and finished devices go out. The Economic Survey makes exactly this point, observing that as India's exports of finished products rise there is a matching rise in imports of their intermediate inputs.

And gold. Gold and silver were 8.7 per cent of imports in 2024-25 and grew 27.4 per cent in that year, largely because the gold price rose 38.2 per cent. Gold is bought as a store of value, not as an input to anything, so a large gold import bill converts domestic saving into an idle asset and worsens the current account at the same time. It is the reason gold import duty is a recurring policy question.

The most recent year in the Survey's own words

For 2024-25 the Economic Survey records that:

• Merchandise exports were 437.7 billion dollars, about the same as the previous year, and imports 721.2 billion, up 6.3 per cent, so the merchandise trade deficit widened 17.6 per cent to 283.5 billion dollars.
• The apparent stagnation is misleading: non petroleum, non gems and jewellery exports were 78.7 per cent of the total and grew 7.5 per cent, and non petroleum exports reached a record 374.3 billion dollars. Exports of petroleum products fell 24.7 per cent because the crude price fell 15.4 per cent, and that decline masked growth everywhere else.
• Telecom instruments grew 51.2 per cent and drug formulations and biologicals 11.2 per cent.

The lesson of that paragraph is a lesson about reading trade data at all. A headline export number that does not move can conceal a strongly growing export sector, because two volatile items priced in world markets, petroleum and gems, move the aggregate more than everything else put together. Always ask what the number looks like with those two removed.

A worked example: computing a share, and reading it correctly

Every figure in this chapter is a share, and a share is a division. Take the 1990-91 export table and do it.

Now the trap. Leather and leather manufactures were 1,449 million dollars in 1990-91, being 8.0 per cent of exports, and are 1.1 per cent of exports today. Has India's leather industry collapsed?

No, and the arithmetic proves it. Exports in 2024-25 were 437,705 million dollars, so 1.1 per cent of them is about 4,800 million dollars. Leather exports have therefore risen roughly three and a third times in current dollars while their share of the basket has fallen by seven eighths.

A falling share means the rest of the basket grew faster, not that the item shrank. That single distinction disposes of most of what is written about the decline of India's traditional exports, and a student who states it has answered the question better than one who recites the shares.

Why the composition changed

1. Liberalisation removed the anti export bias. Once inputs could be imported freely and at low duty, an exporter was no longer paying above world prices for its steel, chemicals and components.
2. Scale became lawful. The end of industrial licensing and the gradual removal of small scale reservation allowed firms to reach a size at which exporting is possible.
3. Refining capacity was built, which created the petroleum products export that did not exist in 1990.
4. Global supply chains reorganised, so that trade is now largely in components and stages of production rather than in finished goods, which is why electronics appear on both sides.
5. Human capital, in pharmaceuticals, engineering design and software, which is where India's advantage has proved durable.
6. Rising domestic income, which drives the gold and edible oil bills.
7. What did not change: the country has no large domestic crude oil resource, so the oil bill is a fact of geology and not of policy.

What beginners get wrong

"After 1991 India shifted from primary exports to manufactures." Manufactures were already 72.9 per cent of exports in 1990-91 and are 71.0 per cent now. The shift was within manufactures.

"Exports of textiles and garments grew because of liberalisation." Their share fell from about 21 per cent to about 6 per cent. They grew in value while the basket around them grew faster.

"India has reduced its dependence on oil imports." Petroleum was 25.0 per cent of imports in 1990-91 and 25.8 per cent in 2024-25.

"Petroleum is only an import." It is India's largest single export group after engineering, at 15.3 per cent of exports, because India refines imported crude and sells the products.

"A flat export number means a stagnant export sector." In 2024-25, total exports were flat while non petroleum, non gems exports, being 78.7 per cent of the total, grew 7.5 per cent.

"Gold imports are like any other import." Other imports are consumed or used in production. Gold is stored, so it worsens the current account without adding to output.

Limits

Groupings differ between the 1990-91 and the 2024-25 tables, so the broad group comparison is sound and item level comparisons are indicative.

All figures are in current US dollars, so part of every increase is world inflation and part is the exchange rate.

Merchandise only. Services are not in these tables at all, and they are where India's real change lies. The next chapter takes them.

Shares are shares. A falling share does not mean a falling value: leather exports have grown in dollars while falling from 8.0 per cent of exports to 1.1 per cent.

Quick revision

1. Broad export groups, 1990-91 to 2024-25: agriculture and allied 19.4 to 12.0; ores and minerals 4.6 to 1.6; manufactured goods 72.9 to 71.0; mineral fuels and petroleum products 2.9 to 15.3.
2. Manufactures did not rise as a share. The change is inside them.
3. Fell: textiles and garments about 21 to about 6 per cent; gems and jewellery 16.1 to 6.8; leather 8.0 to 1.1; jute from a fifth of exports in 1960-61 to nothing.
4. Rose: machinery and instruments 9.8, transport equipment 7.3, metals 5.3 and iron and steel 2.1, together about a quarter of exports; electronic goods 8.3, growing 31.5 per cent in 2024-25 and 47.0 per cent in the first half of 2025-26; petroleum products 15.3; pharmaceuticals.
5. Imports, 1990-91 to 2024-25: petroleum 25.0 to 25.8, essentially unchanged; capital goods 24.2 to 12.3, halved; electronic goods from no separate line to 13.7, the largest item after fuel; gold and silver 8.7, up 27.4 per cent in 2024-25 on a 38.2 per cent rise in the gold price.
6. 2024-25 headline: exports 437.7 billion dollars, imports 721.2 billion, merchandise deficit 283.5 billion, up 17.6 per cent. Non petroleum, non gems exports were 78.7 per cent of the total and grew 7.5 per cent while petroleum product exports fell 24.7 per cent.
7. Causes: removal of the anti export bias; lawful scale; refining capacity; global supply chains in components; human capital in pharmaceuticals, engineering and software; rising income driving gold and edible oil; and the geological fact that India has little crude oil.

Test yourself

1. Describe the structural change in the composition of India's exports since 1991. At the level of broad groups the change looks smaller than it is. Agricultural and allied products fell from 19.4 per cent of exports in 1990-91 to 12.0 per cent in 2024-25, ores and minerals from 4.6 per cent to 1.6 per cent, and mineral fuels including petroleum products rose from 2.9 per cent to 15.3 per cent; but manufactured goods were 72.9 per cent of exports in 1990-91 and 71.0 per cent in 2024-25, so their share did not rise at all.

The transformation occurred inside the manufacturing group. The labour intensive traditional exports contracted sharply as a share: textile fabrics and garments fell from about 21 per cent of total exports to about 6 per cent, gems and jewellery from 16.1 per cent to 6.8 per cent, leather and leather manufactures from 8.0 per cent to 1.1 per cent, and jute manufactures, which had been more than a fifth of all exports as recently as 1960-61, disappeared from the table. In their place came engineering and technology intensive goods: machinery and instruments at 9.8 per cent, transport equipment at 7.3, manufactures of metals at 5.3 and iron and steel at 2.1, together about a quarter of exports against 11.9 per cent for the whole comparable category in 1990-91, together with electronic goods at 8.3 per cent, which had no separate line in 1990-91 and grew 31.5 per cent in 2024-25, and pharmaceuticals. In substance India has moved from exporting what its least skilled workers made to exporting what its engineers and chemists make.

2. What has and has not changed in the composition of India's imports? Three things stand out. First, and contrary to what most students expect, the share of petroleum has hardly moved: petroleum, oil and lubricants were 25.0 per cent of imports in 1990-91 and petroleum was 25.8 per cent in 2024-25, with fuel as a whole, including coal, at 30.1 per cent. Thirty four years of growth, of refining capacity and of domestic exploration have not changed the proportion of the import bill spent on energy, which is why the current account remains exposed to the world price of crude.

Second, capital goods have halved, from 24.2 per cent to 12.3 per cent; in 1990-91 nearly a quarter of imports was machinery because India was building an industrial base and could make very little of the equipment itself, and the fall reflects both the growth of domestic capital goods production and, less happily, the strength of investment demand. Third, electronic goods have risen from no separate line at all to 13.7 per cent, the largest single item after fuel, and they are simultaneously the fastest growing export, which is the signature of participation in a global supply chain where components are imported and finished devices exported. To these should be added gold and silver at 8.7 per cent of imports, which rose 27.4 per cent in 2024-25 largely because the gold price rose 38.2 per cent, and which are peculiar because gold is stored rather than consumed or used in production, so it worsens the current account without adding to output.

3. Why can a flat headline export figure be misleading? Because two items whose prices are set in volatile world markets, petroleum products and gems and jewellery, move the aggregate more than the rest of the basket does. In 2024-25 India's total merchandise exports were 437.7 billion dollars, essentially unchanged from the previous year, which suggests stagnation. But exports of petroleum products fell 24.7 per cent, because the price of crude fell 15.4 per cent and refined product prices followed, and gems and jewellery also fell. Excluding both, non petroleum and non gems and jewellery exports, which are 78.7 per cent of the total, grew 7.5 per cent, and non petroleum exports reached a record 374.3 billion dollars. Within that, telecom instruments grew 51.2 per cent and drug formulations and biologicals 11.2 per cent. The correct reading is therefore that the export sector grew respectably while a price driven fall in two large items concealed it, and the general lesson is that trade aggregates should always be examined with the price sensitive items separated out.

4. Why does petroleum appear as both a major import and a major export? Because India buys crude oil and sells refined products. It has very little crude of its own, so petroleum crude is one of the largest items in the import bill, at 25.8 per cent of imports in 2024-25. It has, however, built very large refining capacity since the 1990s, and refining converts crude into petrol, diesel, aviation fuel and petrochemical feedstocks whose value exceeds that of the crude. Those products are sold abroad, so mineral fuels including petroleum products rose from 2.9 per cent of exports in 1990-91 to 15.3 per cent in 2024-25. The economic significance is that India earns a refining margin rather than a resource rent: its exposure is not to the level of the crude price as such but to the difference between crude and product prices, and its gross trade in petroleum is far larger than its net position. It also explains why both the export and the import totals swing when the oil price moves, and why the two swings partly offset each other.

5. What caused the change in composition? Several forces acted together. Liberalisation removed the anti export bias of the earlier regime: once inputs could be imported freely and at low duty, an Indian exporter stopped paying more than its foreign competitors for steel, chemicals and components. The end of industrial licensing and the gradual dismantling of small scale reservation made scale lawful, and exporting is not possible below a certain size. Very large refining capacity was built, creating a petroleum products export that had not existed.

Global production reorganised into supply chains in which countries trade components and stages of production rather than finished goods, which is why electronics appear on both sides of India's account and why the Economic Survey observes that rising exports of finished products bring a matching rise in imports of their intermediate inputs. India's human capital gave it a durable advantage in pharmaceuticals, engineering design and software rather than in mass assembly. Rising domestic incomes drove the gold and edible oil import bills. And one thing did not change at all: India has no large domestic crude oil resource, which is a fact of geology rather than of policy, and it is why the oil share of imports is where it was in 1990.