When Compared to China, India Has Huge Potential in Exports, Says Niti Aayog; Guj Tops Preparedness Index

Gujarat has topped the Niti Aayog’s Export Preparedness Index 2020 followed by Maharashtra and Tamil Nadu in the second and third place respectively, according to the government think tank’s report released on Wednesday.

According to the report, six coastal states – Gujarat, Maharashtra, Tamil Nadu, Odisha, Karnataka and Kerala – feature in the top ten rankings, indicating the presence of strong enabling and facilitating factors to promote exports.

Among the landlocked states, Rajasthan has performed the best, followed by Telangana and Haryana. Among the Himalayan states, Uttarakhand topped the chart, followed by Tripura and Himachal Pradesh, the report said adding that across Union Territories, Delhi has performed the best, followed by Goa and Chandigarh. The report noted that Chhattisgarh and Jharkhand are two landlocked states that had initiated several measures to promote exports.

Other states facing similar socio-economic challenges can look at the measures taken by Chhattisgarh and Jharkhand and try to implement them to grow their exports, the report noted.

Speaking at the launch of the report, Niti Aayog Vice Chairman Rajiv Kumar said exports are an integral part of Aatmanirbhar Bharat and the country will have to keep striving to increase the share of exports in GDP and world trade.

“We will try to double India’s share in world trade in the coming years,” he said. The Niti Aayog Vice Chairman pointed out that India’s per capita exports stood at $241, compared to South Korea’s $11,900 and China’s $18,000, so there is a huge potential for growth of India’s exports, he said adding “states must look at creating a separate department for exports promotion.”

Kumar said the government of India has made it clear that production linked incentive (PLI) schemes are critical to promote exports. He said there is a need to distinguish between coastal states and landlocked states because conditions for exports in coastal states and landlocked states are very different.

Niti Aayog CEO Amitabh Kant said rapid growth of exports is a crucial component for long-term economic growth. “A favourable ecosystem enables a country to contribute significantly to global value chains and reap the benefits of integrated production networks, globally,” Kant added.

India’s merchandise exports have witnessed growth from $275.9 billion in 2016-17, to $303.5 billion in 2017-18, and to $331 billion in 2018-19. However, the COVID-19 crisis dealt a major blow to the current fiscal. Consequently, India’s exports shrank by 60 per cent in April 2020.

Niti Aayog in partnership with the Institute of Competitiveness released the first Export Preparedness Index (EPI) 2020. The EPI intends to identify challenges and opportunities and encourage a facilitative regulatory framework. The index ranked states on four key parameters policy; business ecosystem; export ecosystem; export performance.

The index also took into consideration 11 sub-pillars – export promotion policy; institutional framework; business environment; infrastructure; transport connectivity; access to finance; export infrastructure; trade support; R&D infrastructure; export diversification; and growth orientation.

On policy parameters, Maharashtra topped the index followed by Gujarat and Jharkhand, while on business ecosystem parameter, Gujarat was ranked number one followed by Delhi and Tamil Nadu. In the export ecosystem parameter, Maharashtra topped the Index followed by Odisha and Rajasthan and on the export performance parameter, Mizoram led the index, followed by Gujarat and Maharashtra.

The report pointed out that at present, 70 per cent of India’s export has been dominated by five states Maharashtra, Gujarat, Karnataka, Tamil Nadu and Telangana. It also said that most Indian states performed well on average across the sub-pillars of exports diversification, transport connectivity, and infrastructure. The average score of Indian states in these three sub-pillars was above 50 per cent, the report said.

It also observed that export promotion in India faces three fundamental challenges: intra- and inter-regional disparities in export infrastructure; poor trade support and growth orientation among states; and poor R&D infrastructure to promote complex and unique exports.

Noting that the states are also largely lacking in terms of providing basic trade support, such as a trade guide, the report said there are only 10 states in the country that provide a trade guide, while only 15 states have ensured an online portal for dissemination of information to exporters.

The low export credit also remains a challenge, the report said adding that Delhi and Chandigarh are the only two states that provide high credit of around 5.31 per cent and 3.36 per cent respectively, in comparison to the country average of 0.6 per cent.