How Government is building capacities for sustained export growth amid Global Economic Slowdown fears

By Ajay Srivastava

India’s FTA with Australia would be unique. It would be India's first FTA, where the partner country has agreed to eliminate import duties on all products exported from India. In contrast, India would cut duties on about 70% of product lines. 

Speaks about the tenacity of Indian negotiators led by the Commerce Minister. Australian parliament ratified the FTA on November 22. It will soon become operational. 

But negotiating FTAs is not the only ambitious agenda, GOI pursuing. It is quietly making laws and systems to build a robust industrial and export base. Here are eight key initiatives:

Enabling more firms to export. India has more than 20 Lakh firms that produce quality products and services, but less than a lakh of these export. Major product categories include: Handicrafts, jewelry, ethnic wear, decorative paintings, and Ayurveda are key product groups. Considering India's artisanal expertise, each product group can become a billion-dollar-plus category. GOI is implementing the District as export hubs scheme to support and handhold them. 

We hope to see the number of firms doing commercial export transactions going up from an estimated one lakh to five lakhs in three years. 

Today, just three states Gujrat, Maharastra, and Tamilnadu, do half the exports. The District as export hubs scheme would push others to catch up. 

Flexible labor policies. Labour laws apply to only formal workers, just 8% of all workers. Many firms employed fewer workers to avoid complex labor law compliances. The four new labor codes focus on reducing the number of compliances and replacing inspectors' visits with online filing. The Industrial Disputes Act would apply to factories with more than 300 workers. The number was 100 earlier. When implemented by all states, the changes will nudge millions of small firms to hire more. The new Labour codes will help set up many medium and large-scale units.

Supporting manufacturing of high-tech products. India's share in global exports of many items that sell in high value is low. Consider share of few product groups. Machinery 0.9 percent, electronics 0.4 percent, Integrated circuits (0.03 percent), computers (0.04 percent), solar cells (0.3 percent), and LED TV (0.02 percent). GOI has introduced PLI schemes in 15 product sectors to make India a vital production center in these product groups. As firms enter production mode, we expect to see a jump in India's exports from next year.

Making Commercial courts efficient. Court delays in settling commercial disputes stunt industrial growth. Indian Textiles' example is revealing. Till the late 1980s, India and China were exporting less than $5 billion of textiles and apparel. Later, as the global Textile market expanded, the buyers demanded a timely supply of agreed-quality products. The system worked through a series of contracts between the buying and sourcing agents, who were the links between buyers and sellers. Due to India's weak contract enforcement system, the agent system could not develop adequately, leading to a loss of connection with buyers. The system in China worked fine. 

Today, China's textiles and apparel exports are $320 billion, while India struggles at $40 billion. Weak contract enforcement is a crucial reason for most woes of the Indian textile industry. The example applies to most sectors.

GOI made a series of interventions. From introducing new laws to automating courts. The results were visible. The time taken to settle a case has come down from 1445 days in 2019 to 700 in the commercial courts in Mumbai and Delhi. Work is on to improve further. 

Introducing WTO-compatible export schemes. The government has abolished WTO non-compatible export schemes. The most important one was the Merchandise Exports from India Scheme, which distributed over Rs 40000 Crore annually to over 40000 firms. It was discontinued in 2020. In its place, GOI introduced Remission of Duties and Taxes on Export Products (RODTEP) and Rebate of State and Central Taxes and Levies (ROSCTL) schemes which are WTO compatible. Exporters can use these schemes without fearing retaliatory action in destination countries.

Improving product quality through regulation. Many Indian products fail quality tests due to traces of pesticides, pathogens, illegal dyes, etc. India needed to redesign its quality infrastructure to help firms reach higher standards and protect the country from substandard imports. GOI has issued Quality Control Orders (QCOs) and Technical Regulations (TRs) for electronics, safety glasses, toys, microwaves, tyres, LCDs, CFLs, etc. Quality consciousness will help Indian products to match the global standards and export products at higher values to developed nations.

Diversifying Services sector. The IT and services sector, which brings over half the revenue, dominates India's Services exports sector. GOI is working to diversify exports through a push in twelve service sectors under the Champion Services Sector initiative. Important new sectors are Tourism and Hospitality Services, Medical Value Travel, Audio Visual Services, Legal Services, Communication Services, Construction and Related Engineering Services, Environmental Services, Financial Services, and Education Services. 

Activating Indian trade mission abroad. The government has taken steps to energize Indian missions abroad to promote Trade, Tourism, Technology & Investment goals. Missions have been tasked to promote India's exports in the respective countries, alert export promotion councils/exporters to opportunities for promoting the export of specific goods and services, and facilitate buyer-seller events.

The world is already slowing down. The finest way to push exports during such times is by focusing on fundamentals. The measures suggested are concentrating on just that. They will help create jobs, increase exports, reduce imports, and widen the economic base.

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