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5 Ways India Can Improve Its Export Growth

Posted by Sourajit Aiyer in Business and Economy
March 16, 2018

At Magnetic Maharashtra, the investor road-show of Maharashtra, I heard a panel discussion where participants from the government and the industry discussed the initiatives being taken and the ideas to improve India’s export growth. Export drives economic growth, along with consumption and investment.

According to IMF data, the average growth rate of India’s goods export from 2012 to 2016 was 3%. Most large emerging economies fared better, and so consumption remained India’s main growth-driver. But IMF expects this average growth-rate to improve to 8% from 2017 to 2021, making India one of the fastest-growing amongst its large peers. In fact, the years 2016 and 2017 have already seen an uptick in growth. So what is India doing that is yielding initial results? What can it further do, so that it can realise its long-term expectations? Below are some inputs from the panel.

Taking Information Dissemination Up To The District Levels

A challenge for export-industries across the hinterland, especially MSME (medium and small scale enterprises) players, had been the lack of information awareness. The central government prioritised this in recent years by putting all relevant information in the public domain. It launched a trade-analytics portal that shares data about products and volumes. It is conducting workshops to disseminate information about the government’s schemes like foreign trade partnerships and promotions so that even smaller exporters can become aware and participate in it. It is disseminating the information right up to the district industrial centres. Its foreign trade strategy documents are available publicly. These initiatives would also help close the knowledge-deficit in standardisation and quality control. States are advocated to set up state export promotion agencies now, so that they can craft a more customised strategy and disseminate information to a more micro-level.

Market-Based Export Promotion And Not Just Supply-Based Export Promotion

In line with understanding customer needs and delivering accordingly, there is a shift towards demand-based export. India’s recent outreach to assist African countries has been more on the soft-development sectors like healthcare, education, etc. – where Africa needs critical help. This can open up opportunities for exporters in those fields. It is also looking at global value-chains to identify sweet-spots where Indian products can fit, apart from identifying any value-addition its existing products may need so that they do not become irrelevant in the fast-changing marketplace.

Adding new products to the export basket, along with finalising its technical standards, understanding its major markets and conducting SWOT analysis on competing nations, can help ramp up exports further. Lastly, given our population and the focus on skill-training, exporting skilled talent to deficit regions can, in itself, be an opportunity.

Streamlining The Infrastructure And Logistic Aspects

The GST reduced logistical issues in inter-state movements, and initiatives like the Delhi-Mumbai corridor would further reduce end-to-end transport times. There is also a need to reach out more to the business to consumer (B2C) setting. With consumption migrating online, an e-business platform focusing on the MSME exporters could add value. Current online shopping platforms offer that but they need to ramp up even further. It also needs to re-draft export forms that require the final buyer’s name, which is often difficult in e-business since the goods go to a central warehouse rather than the end-buyer directly, as well as avoid excise on products that are returned back.

India also needs showcase-infrastructure like convention centres, that would help conduct sector-specific road-shows and help open up exports to more prospective buyers. A note is already included in the government’s documentation for a gem and jewellery convention centre, a sector that currently comprises the highest share of India’s export in goods, at 15%. The ability to move from protectionism-style labour laws to fixed-term contract labour could help make smaller exports more competitive and dynamic.

Identify Focused Products For Focused Markets

There is a need to go back to the drawing board and identify specific products for specific markets, where India has the competency to deliver. Agriculture export is an example. With several countries in the Middle East being food importers and India focusing to improve its agriculture productivity, there is an opportunity for India to offer competitive and quality produce to the Middle East markets who currently import food from Europe, Africa, etc.

Closing The Skill Gap

There cannot be any disconnect between skill-supply and what the industry demands. But skilling and capability-building is a key challenge, especially as wage-arbitrage is fast eroding as a competitive advantage. While the National Skill Development Corporation (NSDC) has been working towards skill-training in specific fields, the shift towards demand-based export can further determine the new skills which are needed. Apart from skilling, exporters may also need R&D support in specific areas of capability-building, especially the smaller exporters who do not have easy access to know-how.

India has already implemented some of these initiatives and the effects are visible in the export growth-numbers in the recent years. If it can effect further ideas for improvement, it can even realise the long-term growth expectations!

A version of this article was originally published here.