Context: The post-Covid situation provides an opportunity for exports in India.
Significance of Indian exports:
Role in Gross Domestic Product (GDP) growth: During 2000-2011, exports grew at an annual rate of 21 % and 24 %, for goods and services, respectively.
Concerns with exports:
Recent decline: Stagnation in exports of goods during and decline in services exports during 2012-19
Decline as a percentage of GDP: From 25 % in 2012 to 19 % in 2019.
Low share in the world: India accounts for less than 2 % of the world exports of manufactures, while the share of China is 13 %.
Failure in raising the share of labour-intensive products in the export basket: even after 1991 reforms, which ignored factor markets and mostly focused on product-market liberalization.
Impact of COVID on trade:
India: During April to October 2020, India’s overall exports declined by 14.5 %.
World: The World Trade Organization forecasts a 9.2 % decline in the volume of world merchandise trade for 2020.
Way forward: To boost export in the post-Covid world -
Address rigidities in the factor markets (labour and land):
Remove the bias towards the capital- and skill-intensive industries.
Participate in global value chains (GVCs) in labour-intensive industries and product lines; Emerge as a major hub for final assembly-related activities within GVCs.
Utilize unexploited potential: in traditional unskilled labour-intensive products such as textiles, clothing, footwear and toys.
Greater integration of domestic industries with GVCs:
Integration with Asia: By signing free trade agreements; revisit our position and negotiate with the Regional Comprehensive Economic Partnership (RCEP) countries to our advantage.
According to the last Economic Survey, by integrating “Assemble in India for the world” in “Make in India”, India can create 40 million well-paid jobs by 2025 and 80 million by 2030.
Enhance ease of doing business: including honouring contracts, a flexible labour market, availability of land and other infrastructure.
Modify trade policy: Reverse the recent trend of protectionist policy by lowering import tariffs, which increased from the lowest-ever level of about 12 % in 2008 to 15 % in 2019.