Propelling India's Growth Through Trade

Trade concentrations exist everywhere, and they are a source of both strength and worry. India's business and policy leaders can find effective strategies that reimagine, rather than retreat, from them

- GAUTAM KUMRA

WE ALL RELY ON global trade. And despite the many disruptions to the global trading system over the past few years—by conflict, climate change, the Covid-19 pandemic and lockdowns—countries are still remarkably interconnected. Recent research from the McKinsey Global Institute (MGI) shows that every region in the world relies on imports for more than 25% of at least one important type of good.

Self-sufficiency is a mirage, and it ignores the benefits that this interconnectedness brings: improving efficiency, increasing global product availability, and fostering economic growth. India is no different. In fact, the country’s trade interconnectedness should be seen as a strength powering its growth in the next few years.

These benefits come not just from trade connections but also from trade concentrations. We estimate that about 40% of global trade by value is concentrated. By this, we mean that importing economies rely on three or fewer nations for this share of global trade. Furthermore, 25% of this is concentrated at a global level. This means that for some products, such as laptops, soybean, or iron ore, there are only a few countries that export nearly all of them.