Exports: A post-Covid opportunity

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.