Free Trade Agreements and export basket diversification as important tools for export growth: Comparing India and Vietnam
Vietnam is emerging as a new manufacturing hub and seem to be making substantive gains due the China plus one strategy. Manufacturing as a percentage of GDP is 13 per cent in India, while it is 25 per cent in Vietnam. While there can be various factors like labor cost advantage, strategic location, skilled labor, etc, that play an important role, this article will talk about the role of Free Trade Agreements (FTAs) and diversified export basket that have spearheaded this trend. The rise of manufacturing activities in Vietnam is clearly reflected in its export performance, and its share in global export increased from 0.6 per cent in 2011 to 1.7 per cent in 2022. For India, the share in global exports rose by merely 0.2 per cent, from 1.8 per cent in 2011, to 2 per cent in 2022. The numbers clearly show that Vietnam is giving serious competition to India’s exports. A clear cut off can also be seen in export to GDP ratio for Vietnam, during the period before and after 2010, while forIn