Make India Ship Again

Context: Global pandemic open up the sea of opportunity for India to take lead by swift and assertive policy actions across logistics and supply chain management.

India exports scenario

• Swift recovery: 45% average growth for last three months infers that at the current pace exports could rise to the total of $380million this year, that is 1.5 times the pre-pandemic level in 2019.
• Higher value chain exports: Indian exports risen mainly on the basis of products that are higher up in value chain such as engineering goods, textiles, pharma and organic chemicals.
• Low on value addition: Bulwark of India’s exports that push the headline number up, but are low on value addition.
• Drivers of export growth: Two key drivers of exports are he income and the substitution effect
  • The income effect constitutes a rise in export demand for exports driven by a rebound in major buyer countries like the US and Europe. This explains the current boom.
  • A substitution effect implies a gain in market share by one country at the expense of others. Asian scenario implies this is not the dominant factor as all countries are witnessing higher exports.

Way forward

• Leverage comparative advantage: As the rise in Delta cases in several Asian economies, coupled with a low-tolerance containment policy, is leading to supply and production disruptions that can work in India’s favour.
• India needs to focus on easing logistics performance: World Banks’s Global Logistics Performance Index (LPI) ranks India lower than its peers at 44th out of 166 countries in 2018, compared to China at 26th, Thailand at 32nd and Vietnam at 39th.
  • Immediate steps include freeing up idle shipping container (currently under dispute from custom or other departments) to cater exporter with container shortages.
• Ease of Business to Ease of shipping: As income effect will not continue forever and India need to have larger share in the trade pie to sustain the export boom.