Context: measures to increase exports
- India’s share in world exports is still very small at 1.8 per cent in 2018 compared to China’s 13.8 per cent. India should aim at raising its share in world exports to at least a respectable 5 per cent.
- For this, India’s exports (of goods) should reach around US$ 1000 billion by 2020 which means India’s export growth rate needs to be around 27 per cent CAGR in the 5 years (2016-2020) assuming that global growth continues at the present CAGR of 1.5 % (2010-15).
- Most of Indian exports fall under two groups
- Group A: products include electronics, computers, telecom, factory machinery, and high-end engineering products. India’s global share in such products is 0.4 per cent, but group A products account for 70% of world trade.
- Group B: India has a high global share in group B products such as small diamonds, jewellery, rice, buffalo meat, shrimps, and textiles. Medicines, auto components and marine products also form part of this group. And group B products for 30% of world trade.
Measures to improve exports of group A category:
- Target product market: It is imperative to identify the focus product baskets, where India has established credibility, growth potential is high like ferrous casting, steel forging. The selection of the target markets needs to be done based on the future demand, acceptability of Indian products, and India’s competitiveness in those markets.
- Trade agreements alignment to get maximum benefits from preferential tariffs: Recently government officials on different occasions mentioned that Indian trade agreements are not adequately aligned with countries that have consumption potential.
- Recently, India’s engineering exports have been led by developed nations such as USA, EU, Middle East, and these are now fast shifting towards emerging economies such as SAARC, ASEAN, Africa, CIS, and Latin America.
- Therefore, it is critical that future policy actions focus more on the emerging destinations with high potential of export to boost India’s overall exports. The trade negotiations should have representations from the industry to include relevant tariff lines and appropriate Rules of Origin (ROO) criteria to benefit Indian exporters.
- Counter trade and offset measures: India has significant trade deficit in engineering goods with some specific countries where counter trade measures could be explored, to increase export and involvement of SMEs.
- India has significant trade deficits with countries such as China, Iran, Saudi Arabia, Australia, Indonesia, Kuwait, Nigeria, Qatar, Peru, Argentina, Ghana, etc. The government could consider devising a counter trade mechanism for identified product categories
Measures to improve exports of group B category:
- Create product design and development studios: The MSME Ministry facilitates many centres that assist small firms in developing new prototypes. We need to scale these to include the latest tools and also increase their number. This will help innovation-driven small firms and reduce dependence on import of daily-use goods.
- Set up product quality testing labs: Many small firms are not aware of quality standards/certifications. They get a shock when products are rejected. India needs to set up more globally accredited testing laboratories. And, enhance capacities of the existing laboratories.
- Open large product exhibition centres cum markets: China has many sizeable wholesale markets where local firms display their products to a large number of foreign buyers. Such exchanges will help small firms to showcase their products and get orders without travelling abroad.
- Provide actionable trade intelligence: Simple information like which country is buying what product at what price helps. Data suggests that a firm exporting two similar category products (for example, boy’s shirts and men’s shirts) has three times the turnover than the firm shipping only one product (boy’s shirts).
- Data also reveal that a firm exporting one product to three countries has five times the turnover than a firm exporting to one country. With bits of such information, most firms can readily scale turnover and earn more money.
- Reduce cost of doing business: This can be achieved by improved access to capital, quick refund of GST, online regulatory approvals, low duty on inputs, promoting e-commerce exports from Tier 2/3 cities, and so on.
Way forward: Even though the exports target of $1000 billion by 2020 looks unrealistic, India can achieve significant exports growth if it implements the right mix of sustainable policies in a time-bound manner. It is high time we realize there is no short cut to boosting exports and the phasing out of export subsidies is a reality. Measures such as enhanced trade facilitation, export and production diversification, lower logistics costs, energy efficiency, lower cost of doing business-and not short-term fixes-will lead to sustainable exports recovery.