India may target $400 bn exports in two years

Buoyed by a pick-up in exports in April-June quarter this year, the central government may target $400 billion annual merchandise exports in two years.

India clocked about $300 billion merchandise exports in 2017-18 after dipping to $275 billion in the 2016-17 – a near 10% annual growth. India achieved $313 billion exports in 2013-14 and in subsequent years, exports have shown a declining trend in the face of global slowdown.

In the first quarter of this fiscal, exports have seen a pick-up, with May witnessing a 20% growth and June 18%. This has prompted the Union commerce ministry to formulate a strategy in consultation with Federation of Indian Export Organisations (FIEO) to push annual merchandise exports to $400 billion in two years.

A sustained 20% exports growth from now will easily push India's merchandise exports to a little over $350 billion this year, and $400 billion in the next fiscal should be achievable, according to FIEO president Ganesh Kumar Gupta.

A 20% exports growth is sustainable, Gupta told DNA Money emphasising that the strategy needed to be aimed at high potential markets such as Africa and Latin America. Indian textiles, handicraft, handlooms, leather, engineering goods, pharmaceuticals and automobiles have a huge potential.

"Even China is importing from India a lot of items like handicraft and carpets, and the US-China trade war too has opened up a window of opportunity to push exports to both Beijing and Washington. However, this needed to be worked upon," he said. The commerce ministry-FIEO joint strategy will be readied shortly, he said.

India had prepared a strategy paper in 2013-14 after sustained high exports growth for almost a decade. At that time the target was to achieve $500 million exports in three years. But it was not implemented as exports slowed down due difficult global situation. Lately, global trade has started looking up.

Widening trade deficit, which is expected to hover around $200 billion this financial year due to surging oil, gold and electronics exports, has "forced us to evolve this new strategy", Gupta said.

Economist H A C Prasad, who recently retired as senior economic advisor in the finance ministry, has come out with a study paper on the challenges and policy initiatives needed to take India's merchandise exports to a new high.

Prasad, who was earlier economic advisor in the commerce ministry, said in the paper that with green shoots in merchandise exports it is only appropriate to raise India's share in world exports to a 5%.

At present, India's share in world merchandise exports is a mere 2% as against China's 14%. Global trade is cruising at 4.5% and it may remain at that level for the next couple of years, but for a temporary blip due to the trade war. It is time for India to try and cash in through sustained exports reforms.

To reach the 5% share, merchandise exports should hit $882 billion by 2022, which means India's export growth rate needed to be around 27% CAGR for five years. This is not impossible as India has had higher exports growth than this during 2004-09, Prasad said.

To boost trade, India has to make its exports demand based rather than supply based as at present.

In most of the top imports of the world, the presence of India's exports is very small. In 2015, India's exports share in the top 100 items was not that impressive, and only in five of those items the share was more than 5%. A demand based exports strategy will enable to increase its share in those 100 items.

India has huge potential increasing farm exports. The strategy is to raise farm exports from the present $40 billion annually to $100 billion with improved packaging and shelf life through better cold storage facilities.

India had a record 375 million tonne horticulture production in 2017-18, which is expected to improve further with good monsoon. India farm production cost is the cheapest in the world and with an improved market strategy, India could step up farm exports in no time. This will also improve farm income, a government official, who did not want to be named, said.

Some specific steps were needed to improve ease of doing business for exporters, besides reduction in transaction cost, delay in ports to make Indian exports competitive, Gupta said, adding a lot has been done but some unfinished tasks have to be attended to.

Prasad suggested setting up of an ombudsman to resolve export related problems as there is no clear cut dispute resolution mechanism at the moment.