• According to statistics released by the WTO in July, the share of India in total world merchandise exports was 1.68 per cent in 2017, a level it has more or less maintained since 2011.
• Recently Indian Prime Minister set a clear target of doubling India’s share of world exports to 3.4 per cent in June. India recognised that this was important if India was to move towards double-digit growth.

Benefits of boosting exports :-

• Quantum jump in exports presents a tremendous opportunity for India. Nearly two-thirds of the world’s production takes place in global value chains. Integrating with these supply chains will not only bring welfare gains, they will also increase efficiency and drive growth.
• India’s economy cannot survive without exports. In 2017-18, exports of goods and services contributed about 12% of India’s GDP. In contrast, exports made up over 42% of South Korea’s GDP. 
• For India to achieve double digit growth, exports will be a crucial part of the strategy.
  1. Exports are an important driver of economic growth and help create much needed jobs for India’s growing workforce.
  2. They played an important role in transforming countries such as South Korea and China in recent decades.
  3. Therefore, India will need to work on increasing competitiveness to expand its exports share in the world market.

Challenges in doubling the share of India’s exports :-

• Economic Survey 2017-18 pointed out that while the share of manufacturing in GDP has improved slightly, the international competitiveness of manufacturing has not made great strides, reflected in the declining manufacturing export-GDP ratio and manufacturing trade balance.
• Existing exports are barely able to hold on to their market shares and new products or markets have not burst forth.
• Most importantly, segments of exports continue to go substantially in primary form and not in a value-added mode. Cotton and cotton yarn than high-end garments and made-ups is an example.
• Indian exports are sensitive to price changes, global demand and supply-side bottlenecks. The way India’s export basket has evolved over the past two decades, it has made them much more responsive to global demand as compared to price changes.
• According to the International Monetary Fund (IMF), in the long-run, a 1% increase in India’s international relative export prices could reduce export volume growth by about 0.9% for all industries and by about 1.1% for the manufacturing sector.
• Logistics sector :- Similarly, higher logistics costs have been a major impediment to export growth. The FTP review document admits that logistics cost in India is close to double of that in developed countries. The average logistics costs in India are about 15% of GDP.
• A mere weakening of the rupee might not be enough to boost exports, at least not in a significant way when it comes to the manufacturing sector due to three possible phenomena discussed here.
  1. India is no longer an isolated market and exports are tightly linked to imports through twin mechanisms of input import dependence and global value chains.
  2. The inputs for two of India’s leading exports, petroleum and derived products and gems and jewellery, originate abroad. Crude, rough diamonds, and gold are imported to make these export products.
  3. There is no change in the level of attractiveness of sourcing from India for an international buyer. Therefore, it doesn’t boost exports in terms of quantity or exports in dollar terms.
  4. Fall in the value of rupee didn’t lead to an expected commensurate gain in manufacturing exports during the period 2004-2012 .
• Private investment needs to pick up significantly, but the woes in the banking sector may drag it down. The global economy is increasingly looking dubious and a lot uncertain with an imminent threat of trade wars breaking out. In such a scenario, India is unlikely to achieve 20-25% exports growth, which is needed to achieve double digit growth.

Way forward:-

• Exports need a greater focus in draft industrial policy under consideration and for speeding up the establishment of product-specific industrial clusters and enacting labour reform, at least in export zones.
• Exports will also require a sound export infrastructure by energising the Bharatmala Pariyojana to improve the efficiency of movement of goods and to cut logistics costs.
• The Sagarmala programme with its emphasis on port modernisation, capacity augmentation and port-led industrialisation will need an export orientation.
• Trade facilitation and export finance will also have to acquire high priority.
• Establishment of sector-level standards, compliance and certification mechanisms will be essential.
• And all this will need a time-bound missionary zeal from the government, the states and industry.
• India will have to fine-tune current export schemes (MEIS and SEIS) and move towards more fundamental export promotion strategies such as Trade Infrastructure for Export Scheme (TIES, for bridging gaps in export infrastructure) and Market Access Initiative (MAI, catalyst to promote exports on product-focus country approach) Scheme.
• Reviewing existing free trade agreements (FTAs) and negotiating future FTAs for greater market access will also be critical in such a situation.
• Measures such as enhanced trade facilitation, export and production diversification, lower logistics costs, energy efficiency, lower cost of doing business and not short-term fixes will lead to sustainable exports recovery.