Enhancing India’s Exports Potential

14 Apr 2022

India has crossed the export milestone of USD 400 billion for goods in March 2022, a multidimensional effort from many stakeholders. In the interview, Mr Vir S Advani, Chairman, CII National Committee on EXIM & Managing Director, Blue Star Limited, said “By 2030, India can reach goods exports of about $ 1 trillion and we should work towards achieving it.”

India’s exports have surged and have already crossed USD 335 billion in April 2021 to January 2022, which is a huge jump of 46% over the same period last year. Is the country on track to achieve USD 400 billion of goods exports in the current financial year? This will be the highest ever export performance after several years of moderate to no growth. What can be India’s target over the longer term for exports?

Exports are an important growth factor for any economy. We have seen how several countries, including Japan in the post-World War 2 period, then South Korea and China after 2000, and now Vietnam, have leveraged exports for faster growth. India too can deploy exports as a robust tool to catalyse growth and create millions of new job opportunities.

Global conditions have been subdued over the recent past which has led to India’s exports remaining around $300 billion for some years. The pandemic led to a sharp contraction of over 5% in the volume of world merchandise trade in 2020. In 2021, we saw this global trade growth go up by almost 11%. 

The demand for goods have remained intact as pent up consumption has been rising post the pandemic. 

The Government too has been addressing issues such as ease of doing business and trade facilitation and this has helped processes at the borders, reducing costs and time taken to export.

All this makes us believe that this year, the target of $400 billion of exports is very likely to be surpassed. 

Coming to India’s exports target, we believe that by 2030, India can reach goods exports of about $1 trillion and we should work towards achieving it. 

India has a diverse exports profile, the top 5 products consisting of fuels, gems & jewelry, pharma, machinery and organic chemicals, which have contributed about 38% to total exports in January to October 2021. If we are to look at 1 trillion dollars worth of exports by 2030, which are the products with high potential that  the country should focus on?

Apart from the products that you just mentioned, some others in the top export categories for India are electrical machinery, vehicles, and iron and steel. One product that did really well in the past year is cereals, where our rice exports went up considerably.

If we look closely at these 10 months of the financial year, we find that the large exports which expanded the fastest were iron and steel which almost doubled, fuels which rode on the back of rising prices, and cotton. Gems and jewelry, aluminium products and automotives were the other fast-growing sectors.

CII did an exercise to identify some products that would have high potential for boosting our goods exports and we have highlighted about 13 product categories that can contribute to the trillion dollar target.

These include vehicles, various textile categories, electronics, machinery and chemicals. India already has strong manufacturing capabilities in these 13 sectors and in fact, these were among the fastest growing exports for the country in 2021 at a time when global trade was rising. It shows that India is capable of building up manufacturing capacities to address world demand. 

Exports is a mission that requires strong actions and policies from the Government and also manufacturing capabilities from industry. How do you think the two can come together to build exports?

Exports is a joint effort and requires strategies on many dimensions by many stakeholders. Ministries dealing with specific products and state governments for building infrastructure and ensuring faster processes, have a critical role to play.

Let me mention two priorities that we must keep in mind while considering expanding exports. 

First, our import policies must be addressed together with the export strategy, as many components are imported at many points in the export value chain. There is a need to calibrate import duties and ensure that it is conducive to making Indian manufactured products competitive in global markets. 

Since we are not alone in addressing the export markets, we also have to see what other countries are doing and where they get their competitive advantage from. 

Secondly, the role of global corporations is very critical in expanding exports. Large manufacturers establish global value chain systems, producing inputs in multiple countries and bringing them together in different locations for assembling or integrating the final product. In India, the presence of such foreign firms needs to rise, so that India can effectively become a part of such global value chains.

As you mentioned, the international market scenario is one side of the overall trade equation. Where do we need to focus on to gain market access? 

Our export markets should be strategically targeted. Some considerations while focusing on specific countries would be its overall GDP size, its export values and its population. CII has done a study that shows that over half the $1 trillion export target can be achieved by focusing on just 41 countries. 

CII in its export strategy paper has outlined four areas to open up market access.

First, trade agreements need to be taken up. Many of our competitor nations have FTAs with their key markets which offer them lower customs duties. It is good that the Government is relooking its FTA strategy with trade negotiations underway with the UK, the EU, Australia, UAE and other countries which are traditionally our markets. We need to also iron out non-tariff barriers with those countries where we have FTAs such as ASEAN countries, Japan, etc. 

Second, to attract global investors from many countries, India should build in investment agreements in its trade agreements. 

Third, it is essential to provide a conducive investment climate for foreign investors. Other countries do offer incentives and tax breaks to attract large global investors. I think the PLI schemes for 14 sectors will work towards this as we have seen in the mobile phone sector.

Finally, it is important to market India effectively, build the India brand globally and undertake extensive campaigns overseas. Currently, we have many agencies promoting individual products which does not serve the purpose.  

But while we do all this, how do we make our goods more competitive in the international markets? How do we ensure that Indian goods meet the quality standards and have the required certifications that are accepted globally? What else is hampering our exports?

Manufacturing competitiveness is really the key to boosting exports. India is fortunate that we have wide domestic manufacturing capabilities, abundant workforce, and good access to raw materials. Where we lose out is in logistics costs, fast clearances and approvals, cost of credit, cost of power and other such added costs. 

The Government has come out with the Remission of Duties and Tariffs on Exported Products scheme or RodTEP that is compliant with WTO requirements. However, this does not extend to all products and we have requested the Government to make this more effective.

To build manufacturing competitiveness, CII has highlighted ease of doing business, cost of doing business, promoting special economic zones and export credit. 

On trade facilitation there is a lot that can be done on risk management systems, authorized economic operators, direct port delivery and other areas. 

A key issue is that of standards and certifications which take a lot of time and costs. Testing and certification facilities that meet global standards should be made readily available for manufacturers-exporters across the country.

We need to enhance the participation of Indian SMEs in exports. What would your advice be to a new company that wants to explore the global market? Is there any way that it can find buyers for its products? What would it need to do to locate specific markets?

My advice would be to have a good product first of all. Innovation, design and specifications are what buyers look for to begin with. Once you are convinced about your product, it is good to check the size of the country markets and the applicable tariff rates. Participating in exhibitions overseas or in B2B platforms can help as well. CII has also initiated a market facilitation service that can be availed to study a market and find potential buyers.

The interview first appeared in the March 2022 Issue of CII Policy Watch, Focus Issue on, International Trade Policy.

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