More Flexible Policies Needed To Boost

Context: If India is to take its fair share of world trade in the coming years, the outlook must become more flexible.

Challenges in exports:

• Impact of the pandemic: The Covid pandemic worsened the situation, and the exports slumped by over 7 % in 2020-21 in tandem with the rest of the economy.
• Enormous domestic market: The comfort of an enormous domestic market available for most manufacturers restricts exports.
• Rigours of red-tape faced by exporters, including the rigidity of import-export policies.
• Failed Free Trade Agreements (FTAs): Many such FTAs have been languishing for years, including the one with the European Union. 
  • Besides, India has failed to participate in regional trade groupings that might have been beneficial to its interests, like the Asia-Pacific Economic Cooperation (APEC).
  • India declined to join the  Regional Comprehensive Economic Partnership (RECP), even after several rounds of negotiations. The reasons cited have been concern over third country origin imports and the looming influence of China over the trade grouping.
• Skewed exports: 
  • Despite the addition of numerous manufactured products to the mix, raw materials and intermediates continue to take a disproportionately large share of the export basket. 
  • Iron and steel exports have risen significantly this year, with the bulk of supplies going to China.

Significance of exports

• Necessary for becoming a notable economic power: It is worthwhile to remember that few economic powers have risen to prominence without becoming notable exporters.
• The rise of the post-war Japanese economy was accompanied by a huge export surge that propelled it into superpower status on the world stage.
• As for China, little needs to be said, given its enormous clout as the world’s supermarket and the leading supplier of goods to developed and developing regions.
• The tiger economies of Southeast Asia along with South Korea followed a similar route, becoming major exporters on their way to rapidly becoming more affluent.

Way Forward

• Removing the hesitancy of opening up of the market: India needs to become more proactive in entering into bilateral and regional trade pacts instead of relying on the beneficial effects of being a member of the World Trade Organisation (WTO).
• Focus on finished products: The focus on commodities needs to shift to finished products as these provide value and aid in the creation of jobs in the economy.
• The future outlook could be promising as more manufactured products are likely to move into the export basket after investments in the production-linked incentive (PLI) scheme bear fruit.
• The biggest potential for export growth is in the area of agriculture. India is already the top rice exporter in the world and the fourth largest cotton exporter. It is also the fourth-largest seafood exporter.