By K R Sudhaman
Commerce and Industry minister Piyush Goyal has said India’s services exports are set to touch $ one trillion by 2030. He had said couple of months back India’s merchandise exports that is goods exports will touch $ one trillion in next 4-5 years. Putting these two together India’s goods and services export will surge to $2 trillion in next 6-7 years. Is it in the realms of reality? Some critics do doubt if this is achievable but there are others who are positive and say this is a strong possibility. If India were to become a $5 trillion economy from the present $3trillion in the next few years, It has to adopt export-led growth to achieve at least 9-10 per cent GDP growth on a sustained basis.
China was able to grow in double digit for a couple of decades on a sustained basis because it adopted export-led growth with exports forming 40 per cent of its GDP. So also miracle countries of East Asia and South East Asia which took advantage of globalization and opening up of the World trade. India however missed out on the opportunity at that time as its structural reforms were not whole-hog and at times knee-jerk and tardy. Though India’s exports have come a long way since the opening up of the economy in 1991, it has not grown to its potential though it clocked over 20 per cent growth on a sustained basis from 2004-09 when the economy clocked nearly double-digit growth. Since then exports growth have been tardy partly due to domestic situation and partly due to global situation including Covid and slowing world trade.
Lately the economy has been on a revival mode and exports too have started looking up. The goods exports, which is already clocking over 20 per cent growth so far is expected to cross $400 billion for the first time this financial year after being tepid in the last few years. Services exports, which was $206 billion in 2020-21 despite covid, is expected to be around $250 billion this financial year. No country can achieve high growth without export led growth. No doubt India has a large domestic market but the economy can clock not more than 7 per cent growth even during best of times if it is depended totally on domestic growth, according to former chief statistician Pranab Sen. The additional 2-3 per cent GDP growth will have to come from exports. If India’s goods and services exports were to be $2 trillion in a $5 trillion economy then exports will account for 40 per cent of GDP like China.
This is achievable but the business as usual approach will not get the economy there. As Goyal himself says that for services exports to get to $1 trillion, the country must introduce more standards, improve quality and move up the value chain. There is also a need to look at expanding markets for legal and accounting professions. These structural changes needed to be brought about as services sector also has huge employment potential. Presently, services sector provides employment to 2.6 crore people and contributes nearly 40 per cent of India’s total exports.
Some global economists have already pointed out job creation is critical for the economy to revive particularly of the pandemic. About 11 million people enter job market every year and according to CMIE an additional 121 million people have lost jobs in view of the pandemic. That apart several million people move out of agriculture in search of jobs outside faming every year.
It is therefore a golden opportunity for India to attract labour-intensive manufacturing for exports as many such companies are exiting China with labour cost going up there. Already $150 billion exports of labour-intensive manufactured goods have exited of which India has attracted only $15 billion of such manufacturing. There are many more multi-nationals who want to exit China after Sino-US stand-off as they do not want to depend on only one global manufacturing hub for their supply chain. India now offered that opportunity to attract those industries that are moving out.
With Prime Minister Narendra Modi’s government rightly stepping up infrastructure development targeting Rs 100 trillion in the next 5-6 years, the foundation is being laid to ensure India becomes a global manufacturing hub. The productivity linked incentive scheme in several sectors is a good move of the government to push up manufacturing and thereby employment. Some of the sectors where PLI scheme has been announced are labour-intensive like food processing, electronics, textiles, leather and so on. Coupled with this a boost to construction, tourism and hospitality industry will enhance job creation in the country.
One idea that Prime Minister Modi could adopt is the suggestion made by former chief economic advisor and World Bank chief economist Kaushik. Basu of building small labour-intensive industrial clusters called diamond quadrilateral, dotting along the golden quadrilateral of highway network connecting four metropolis of Delhi, Mumbai, Kolkata and Chennai. This includes two diagonals encompassing Bangalore, Hyderabad and Ahmedabad as well. This will reduce rural stress as farm labour coming out of the sector and not highly skilled rural labour as well could be absorbed in non high tech sectors like textiles, food processing, leather BPOs and low end electronics and white goods manufacturing.
Exports could therefore become engine of economic growth in the coming years if only government adopted pursue economic reforms to cash in on yet another opportunity that has come India’s way. Both the centre and states need to work in unison to ensure this rare opportunity is not lost. (IPA Service)