By K R Sudhaman
India, which missed the bus twice in the past to pursue export-led growth in an era of globalization, is now in the midst of yet another opportunity to utilize trade as an engine of growth. The opportunity has come India’s way in the face of Sino-US trade stand-off and Covid pandemic that has forced many advance economies to explore a new global manufacturing hubs other than China. India fits into the bill but is India ready to cash-in on the opportunity. Does it have the necessary wherewithal to leapfrog and push the sagging growth? Only time will tell if India has succeeded.
India’s commerce and industry minister Piyush Goyal has however made the right noise and Prime Minister Narendra Modi has already announced several schemes to incentivize manufacturing for exports through the PLI scheme in electronics, textiles and a few other sectors. More such incentives are in the offing. After a virtual stagnation in the last few years at around $300 billion annually, India’s merchandise exports have so far started looking up this financial year and this has prompted Goyal to announce $400 billion merchandise exports target this financial year. He has also promised to work out a strategy to take it to $ one trillion by 2030. Export organisations however are not confident of achieving $400 billion dollar this year. But it is certainly likely to be much higher than $300 billion and if right steps are taken, perhaps India could end up close to $400 billion this financial year.
After opening up of the economy in 1991 by Narasimha Rao-Manmohan Singh combine, India’s exports grew from annual $20 billion to around $300 billion by 2013. Thanks to dismantling trade from shackles of controls, dismantling quantitative restrictions and lowering of import tariffs particularly on capital goods. The Globalisation era at the turn of the century enabled India to consistently clock 20 per cent annual growth in merchandise exports. This is besides services exports which stood at around additional $200 billion annually at one point of time. In fact the then commerce and industry minister Anand Sharma announced in 2013 that he would come out with a plan to take India’s exports from $300 billion to $500 billion in three years. That was not to be due to global trade downturn and subsequently some wrong economic measures like demonetization and then the pandemic. Globalisation was cashed-in the hilt by China and other East Asian and South East Asian economies to sustain double-digit growth on a sustained basis. India however failed to do that due to several factors. India missed the bus at that point of time to become global manufacturing hub like China because of inadequate infrastructure, frequent changes in policies, bureaucracy hurdles, plethora of rules to comply with, port bottlenecks so on and so forth.
In fact in China the commercial counsellor in its embassies are from trade ministry and not foreign service officers as in the case of India. This may look a small step but it is important as the commercial counsellor coordinate directly with the commerce and industry back home to iron out differences and tweak policies instantly to promote trade. Single Window clearance does not work on the ground in India due to inadequate coordination among various ministries and authorities. High power tariffs and high transactions costs make it worse as exporters work on wafer thin margin. Delay in sending consignments make things worse, These are certain practical difficulties, which are virtually non-existent in China, east Asian and southeast Asian economies.
Nevertheless there is now yet another opportunity for India to push exports. No country can grow beyond 7 per cent by merely depending on domestic market. The additional growth can come only from exports and India now needed to grow in double-digit on a sustained basis taking advantage of emerging global economic and trade situation in post pandemic era.
Rightly India has now set country-wise goods exports target this year. It has planned to more than double its exports to United Arab Emirates, a 32 per cent growth to US and nearly 50 per cent growth to Singapore. These are three major export destinations apart from UK. Engineering and project exports, petroleum products, gems and jewellery, leather, textiles, chemicals and pharma, plastics, farm products are some of the areas where exports are likely to be stepped up. Commerce Ministry’s internal paper says India is targeting $419 billion this year, which may be slightly off the mark. India has done well to achieve nearly $100 billion merchandise exports in the first quarter of this financial year but if there is a third wave in some parts of the world and India, all these plans could go awry.
More importantly Piyush Goyal and finance minister Nirmala Sitharaman will have to think out of the box on how to remove hurdles on the ground, which seemed to remain despite best of efforts. Freeing exports of controls and thinking big to even set up a free trade zone in entire Andaman and Nicobar as was proposed once, will help. Andaman and Nicobar if developed like China’s Pudong special economic zone near Shanghai can ensure that India’s merchandise exports are more than doubled in a very short time. There are of course some security concerns, which are not insurmountable. Andaman and Nicobar Islands have the potential to become another Hong Kong if only harnessed properly. Let us not miss the bus this time as yet another opportunity may not come all that easily. (IPA Service)