India’s growth impetus for exports must come from the federal states

Over the years, international trade has played an important role in creating a resilient external sector for India. Exports performed commendably in FY22, hitting an all-time high. An important factor in achieving these goals is the outcome of government efforts. Recently, strategies to promote export through setting and monitoring targets have changed. As a result, exports of goods in FY22 reached $422.0 billion, exceeding the $400 billion target. Sectors such as pharmaceuticals, medicines, electronic goods, engineered goods and organic and inorganic chemicals, gemstones and jewelry have shown significant progress in exports in FY22.

Compared to FY22, the global economy experienced slowing growth and recessionary effects in FY23. Consequently, these headwinds have affected world trade. Exports of goods were US$32.91 billion in January 2023 compared to US$35.23 billion in January 2022. Compared to goods, exports of services recorded positive growth of US$32.24 billion in January 2023. Services exports have had a positive impact on overall trade, resulting in a lower trade balance in January 2023 compared to January 2022. In terms of market diversification, India’s export destinations are diversifying. The Netherlands took the place of China among the three most important export partners. The share of Brazil, South Africa and Tanzania has improved.

In order to make India a $5 trillion economy, the government has set an export target of $1 trillion in goods for 2027-28. In order to achieve these goals, the government is taking a multi-pronged approach. Various initiatives are being taken to promote exports. These initiatives aim to promote the medium to long-term resilience of Indian exports. To improve the export ecosystem and competitiveness, there are policies such as the National Logistics Policy (NLP), the System for Remission of Duties and Taxes on Exported Products (RoDTEP), the Trade Infrastructure for Export Scheme (TIES) and PM Gati Shakti. The initiatives aim to reduce the cost of internal logistics and give Indian exports an advantage in global markets. To overcome the demand lag, India has Free Trade Agreements (FTA) with economies like UAE, Australia, UK, Canada, EU, Israel and GCC. Through these free trade agreements, India can gain better access to the world market and create opportunities for competitive exports.

The momentum of Indian exports amid global headwinds needs sustainability. For this, the forthcoming vision of foreign trade policy (FTP) will be of paramount importance. Traditionally, the FTP was formulated for five years. However, the last FTP for 2015-2020 has been extended to March 2023. The policy was extended with the aim of bringing stability to Indian exports during the pandemic and global volatility. As the focus of the FTP has been to establish rules and procedures for trade incentives, expectations for the upcoming FTP are higher given the drop in global demand. It is expected that the FTP will provide chapters on the District as Export Hub (DEH) initiative. The aim of the DEH is to promote exports from the base nationwide. The focus is on making each district a potential export hub. Through DEH, states will play an important role in implementation. Another important goal of DEH is to promote balanced regional growth across the country. According to the 2022 Export Preparedness Index, Maharashtra, Gujarat, Karnataka, Tamil Nadu and Telangana contribute 75 percent of India’s total exports. Therefore, in order to make India a manufacturing hub, policy makers need to focus on the states for India’s growth. Therefore, initiatives like DEH need proper implementation plans to build up export capacities in all districts of the country.

In addition to central government initiatives to improve exports, the role of the states must be taken into account. Export policies at the state level need to be improved and aligned with the central government’s long-term vision. At the state level, it is imperative to continuously track the progress of parameters such as growth trends, logistic and infrastructure facilities, progress of export action plans, progress against the gaps in trade indexes, etc. This should require careful guidelines designed for rigorous trading surveillance. By designing targeted policies, states can make better use of the opportunities for better market access created by free trade agreements.

On Feb. 32, the WTO briefing note released that world trade remained resilient, outperforming pessimistic forecasts for 2022. Going forward, India’s focus should be on keeping exports momentum. The upcoming FTP framework will be on the lookout for this. PictureSource: Accessed 23 February 2023

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