Enhancing Indian Exports

Export growth is crucial for fuelling a country’s growth and employment. India’s export trajectory closely follows global output growth and trade trends, and is dependent on demand in the global economy for sectors of its interest.

In line with global trade slowdown, Indian exports drifted downwards from US$ 306 billion in 2012-13 to US$275 billion in 2016-17. However, with the upswing in global economic activity in the current year, the growth rate for exports has turned around, with positive growth for the last 18 months.

With global growth projected to grow at 3.7% during 2018 (International Monetary Fund, World Economic Outlook), Indian trade prospects continue to look bright for the coming year.

In the first half of the current fiscal year, exports grew at 10.84% from US$ 132 billion in Apr-Sep 2016-17 to US$146 billion. USA, UAE, Hong Kong, China and Singapore (Figure 1) were the top export destinations.

Figure 1: Top Export Destinations during 2016-17

Source: Department of Commerce, Government of India

USA topped the charts with total exports of US$ 23.6 billion for the first six months. China, Singapore and USA were the fastest growing countries in terms of rate of growth of exports (Table 1).

Table 1: Growth Rate of Exports to Top Export Markets (US$ millions)

Source: Department of Commerce, Government of India

The top export commodities for this period were petroleum products with 12% of the total, followed by pearls, precious & semiprecious stones, drug formulations, gold & other precious metals, and iron and steel (Figure 2).

Figure 2: Top 5 Export Goods as Share of Total Exports

Note: Total Exports during Apr-Sept 2017-18 were at US$146 billion
Source: Department of Commerce, Government of India

Iron and steel grew the fastest at a growth rate of 58% from US$3.3 billion in Apr-Sept 2016 to US$5.2 billion in Apr-Sept 2017.

However, according to the latest figures released by the Commerce Ministry, Indian exports registered a decline of 1.12% in October 2017, falling from US$23.36 billion in October 2016 to US$ 23.1 billion. This may in part be attributed to the introduction of the Goods and Services Tax (GST), which has led to a period of adjustment for exporters. Recognizing the issues, the Government has since announced several measures to improve the GST regime for cross-border sales.

Given the buoyancy of the world markets, the decline may be expected to be short-lived in nature and exports are likely to continue on an upward path as the processes associated with the implementation of GST begin to stabilize.

CII Recommendations for Boosting Exports

Confederation of Indian Industry (CII) released a package of recommendations in September, 2017 for bolstering economic growth of the country. The set of recommendations included both short term as well as medium term measures. The slew of interventions also included recommendations for boosting exports, a key growth driver.

Short Term Measures

To boost export competitiveness, an increase in interest rate subvention to 4% has been suggested along with the provision of fiscal incentive packages for the exports sector.

A major recommendation was a managed depreciation of the rupee by 5%, considering the leeway available in terms of lower inflation. Along with boosting exports, this would also result in more export oriented jobs and encourage domestic production.

Total export credit scheduled by commercial banks registered a drop in recent years. Therefore, priority must be given to ensure exporters and potential exporters have access to adequate bank credit. Insurance and risk coverage under the Export Credit Guarantee Scheme (ECGC) must be expanded by raising its capital base and providing incentives for premium paid.

A focused 6×6 approach, targeting 6 major economies/markets, identified on the basis of size of GDP, export engagement, population etc. over 6 years can be taken up for strong export promotion efforts in these countries. A special export promotion body could be set up to establish offices in these countries.

Further, CII has identified 28 manufacturing products in sectors such as auto and auto components, engineering, pharma and textiles, where India has the potential to be a global first or second producer. These products require special attention to build manufacturing capability, scale up on quality and address global markets

Medium Term Measures

Administrative procedures for exports need to be examined for simplification and timeliness. Similarly, infrastructure and connectivity should be aligned to export needs. Time bound clearances along with upgradation and modernization of ports and linkages with transport connectivities have been suggested to reduce time taken and logistics costs.

Indian goods must also meet standards established by regulators in key markets and multiplicity of government ministries and departments in the setting of standards creates confusion in framing and enforcement. The setting up of a National Standards Mission is recommended as a single nodal authority to harmonize Indian standards with global standards. Learning and training centres on quality and standards may also be considered in key industrial clusters to increase capacity building in firms.

A dedicated agency for trade negotiations and remedial actions is important and can be actioned by setting up a high level body with specialist skills and expertise, based on models such as United States Trade Representative (USTR) and United States International Trade Commission (USITC), serving as a single nodal agency representing India.

To spread knowledge about Indian products and build the Indian brand, dedicated marketing offices must be established in key markets responsible for the marketing and showcasing of Indian products. A similar structure should be present in key industrial clusters to assist Indian exporters to connect with overseas markets and provide information on issues such as certification, packaging, labelling and other requirements.

State export promotion policies, infrastructure and efforts for marketing can be developed with holistic trade policies and strategies for developing related infrastructure, last mile connectivity, trade promotion offices, and quality and certification bodies, among others. States should actively promote their products of advantage

With recovery of global markets, strong strategies to boost Indian exports can lead to notable jump, thereby creating jobs and ensuring growth.

 

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