Relevance: GS Paper III (Indian Economy)
Source:
Why has this issue cropped up?
According to statistics released by the WTO in July, the share of India in total world merchandise exports was 1.68 per cent in 2017, a level it has more or less maintained since 2011. The preceding decade was better when India more than doubled its share from only 0.7 per cent in 2001 to 1.67 per cent in 2011.
What led to doubling of share of trade in last decade?
- This was a time when international trade grew rapidly all around. This was reflected, for example, in our imports more than trebling its share in world merchandise — imports from 0.77 per cent in 2001 to 2.51 per cent in 2011.
- The foreign content in our exports also doubled from a little over 10 per cent to 24 per cent during this period, aided by items like refined petroleum products joining our export basket.
Pushing the exports
- India’s imports are fast increasing as can be expected from the demands of a large population with rising expectations. Exports are direly needed to pay for them.
- Prime Minister Narendra Modi set a clear target of doubling India’s share of world exports to 3.4 per cent in June.
- More importantly, he recognised that this was important if India was to move towards double-digit growth.
- He emphasised the need for moderating the dependence on imports by at least 10 per cent by reducing imports in sectors such as energy, electronic goods, defence equipment and medical devices.
Hurdles in expansion of exports
- Notwithstanding the importance of pushing exports to boost economic growth, its exhortation has rarely received high-level political attention in India beyond the commerce ministry.
- There is the paradox that while export was a strategic priority for India, it was not a priority sector for lending.
- While the share of manufacturing in GDP has improved slightly, the international competitiveness of manufacturing has not made great strides.
- Existing exports are barely able to hold on to their market shares and new products or markets have not burst forth.
- Segments of exports continue to go substantially in primary form and not in a value-added mode.
- We face the prospect in the WTO of having to give up some of our export subsidies.
The positive signs
- What may appear to give some hope is perhaps the progress we are making in a few areas with respect to import reduction. Neem coating of fertilisers coupled with their increased production has led to a decline in imports and may even lead to zero imports by 2022.
- Smartphone manufacture is another item that is seeing a higher level of domestic processing and assembly.
- Imports of raw silk from China have come down with a rise in production of bivoltine silk in India.
- There is also a determined effort to produce more defence items.
Way forward
- If the target of expansion of export has to be achieved, it will need a coordinated effort from the entire government, not just the commerce ministry.
- To be exportable in sizeable volumes, value-added products demand capacity, quality, consistency and competitiveness.
- There is a need of a greater focus for it in our draft industrial policy under consideration and for speeding up the establishment of product-specific industrial clusters and enacting labour reform, at least in export zones.
- It will also require a sound export infrastructure by energising the Bharatmala Pariyojana to improve the efficiency of movement of goods and to cut logistics costs.
- The Sagarmala programme with its emphasis on port modernisation, capacity augmentation and port-led industrialisation will need an export orientation.
- Trade facilitation and export finance will also have to acquire high priority.
- Establishment of sector-level standards, compliance and certification mechanisms will be essential.
- Raising some select import duties to spur domestic production could work temporarily. But if this leads to complacency and results in pressures for higher tariffs to be permanent, it will be retrograde and have economy-wide implications.
- The trade deficit continues to show a widening trend. Working to sharply increase merchandise exports, particularly when the earlier double-digit buoyancy in services exports has diminished, seems the only viable option.
Conclusion
All this is a tall order but it can certainly be achieved if there is political will and thrust to ensure not only the success of Make in India in 2025 but that it gets embedded with doubling export share. What is needed is a time-bound missionary zeal from the government, the states and industry.
