Despite the pandemic, India as one of the fastest growing economies has displayed a strong surge in its exports over the past few months. This growth may be attributed to its economic resilience, manufacturing strengths and entrepreneurial dynamism which have enabled the nation to meet the needs of global demand.
A comprehensive and assertive approach can augment India’s merchandise exports to US$ 1 trillion by 2029-30. CII’s report ‘Achieving $1 trillion in merchandise exports: A Roadmap’ outlines products and destination markets that India should focus on and highlights a range of policy actions towards meeting the target.
In 2011-2019, world trade growth remained largely flat, exhibiting just over 3% total growth in this period. India must strategize to raise its share in global exports from the current figure of 1.7%.
Two considerations are to be kept in mind while formulating the roadmap:
First, global value chains are the primary trade model today and India should attempt to integrate closely with them. This will necessitate a well calibrated policy for customs duty rates.
Second, considering global examples such as Vietnam and China, foreign direct investment (FDI) plays a pivotal role in a country’s exports. India too must embrace this approach and attract FDI inflows in its key sectors.
In order to ensure the rise in exports, actions are required at both the demand side for market access in the international arena and the supply side for national competitiveness.
Regarding the key actions at the demand side, India must review its existing trade agreements and work towards new ones with its top markets. To encourage higher investments, investor protection must be given more importance. Multinational companies that are well integrated into global value chains should be encouraged to set up production base in India. Finally, setting up a dedicated internationally recognized marketing agency for export promotion can also lead to a significant increase in exports.
On the supply side, a range of actions have been suggested in the CII report to build national competitiveness.
First, the scheme of Remission of Duties and Taxes on Exported Products (RoDTEP) has been introduced. Its rates need to be extended to all sectors and aligned with taxes and additional costs that are present in the manufacturing ecosystem.
Second, manufacturing competitiveness must be built through a facilitative investment climate. Ease of doing business can be improved by strengthening the national single window system. Issues related to cost of doing business, such as high-power tariffs and administrative delays can be addressed to boost global competitiveness of Indian goods. Further, the creation of Special Economic Zones and industry parks will develop the right facilities to boost exports at scale.
Investments in research, innovation and technology should be targeted at 3% of GDP by 2030, on the foundation of a strong collaboration between Government, industry and academia.
Third, ease of logistics movement and cost of movement of goods should be taken up at the policy level. There is a need for building export connectivity infrastructure and multimodal transport options.
Fourth, there is a need for trade facilitation measures, such as risk management systems, direct port delivery, authorized export operators and digitalization of procedures.
Lastly, progress in labour reforms, regulations for ease of compliance and education and skill development will add to labour productivity and encourage large, labour-intensive manufacturing sectors for export.
In January-October 2021, merchandise exports expanded by 44%. The top products adding to export growth were iron and steel, mineral fuels, cotton, aluminium, vehicles, textiles, electrical machinery & equipment and cereals, amongst others.
Based on the potential to gain global share, 14 products have been identified in the CII report that have a good export opportunitie. These include vehicles, textiles, electrical machinery and equipment, machinery, apparel, chemical products, plastics, pharmaceuticals, etc.
Apart from these, there are other high-potential products from 3 emerging areas namely defence, sustainability and digital technology that can be promoted to develop manufacturing and export capabilities. These include solar panels, electric vehicles and its parts, green products, drones, robots and automation products, and smart products etc.
The target of US$1 trillion in merchandise exports will be achieved if India maintains a compound annual growth rate of 14% between 2022 and 2030. This will require conducive global economic and trade conditions as well as multiple initiatives within the country. With the Government and industry on the same page, the export endeavour can be strengthened to make India a global manufacturing powerhouse for the world.
Read the CII report on ‘Achieving USD 1 Trillion Merchandise Exports by 2030: A Roadmap’ – https://bit.ly/34W1TJ3