Roadmap for Answer Writing

1. Introduction (Brief Context)

• Begin by stating the importance of exports for economic growth, drawing examples from countries like Japan, China, and South Korea, where exports have been crucial drivers of development.
• Mention India’s current global export share (1.6%) compared to its GDP contribution (3.1%), highlighting the gap in potential and actual performance.

2. Factors Limiting India’s Export Competitiveness

• Discuss the specific factors that are hindering India’s ability to increase its share in global exports. Focus on five key challenges:
  1. High Tariffs on Intermediate Goods
     • Fact: “Almost 70% of all anti-dumping duties are levied on intermediate goods”.
     • Explain how these tariffs increase production costs for export-oriented industries, affecting pricing and reducing competitiveness.
  2. Traditional Export Basket
     • Fact: “India’s exports do not comprise cutting-edge products; 70% target markets with declining global share”.
     • Describe how India’s export mix is dominated by traditional, low-value products, limiting its reach to high-growth, high-value sectors.
  3. High Logistics Costs
     • Fact: “India’s logistics cost is about 16% of GDP, compared to 10% in China and 8% in the U.S. and Europe” (Source: Ministry of Commerce).
     • Explain how high logistics costs make Indian products less competitive in global markets.
  4. Complex Business Ecosystem
     • Fact: “India faces red tape, complex tax laws, and high non-tariff barriers, such as administrative fees and labelling requirements”.
     • Illustrate how bureaucratic hurdles and complex regulations increase the cost and time involved in exporting.
  5. Lack of Sector-Specific Approach
     • Fact: “India lacks sector-specific export strategies to fully capitalize on the potential of different sectors”.
     • Discuss how a lack of tailored strategies hinders India from tapping into growth sectors globally.

3. Measures to Boost Export Competitiveness

• Suggest practical measures that can address the challenges outlined:
  1. Decentralized Export Strategy
     • Fact: “NITI Aayog’s report on the Export Preparedness Index encourages states to adopt export promotion policies”.
     • Suggest a decentralized approach where states focus on their own industrial strengths and compete to boost exports.
  2. Aggressive Participation in Global Value Chains (GVCs)
     • Fact: “India should increase its participation in GVCs to capitalize on labor-intensive manufacturing”.
     • Advocate for India to focus on manufacturing sectors that are part of GVCs to tap into growing global demand for network products.
  3. Enhance the Export Ecosystem
     • Fact: “Initiatives like PM Gati Shakti, TIES, RoDTEP can streamline export processes” (Source: Ministry of Commerce).
     • Propose the full implementation of trade facilitation measures like Gati Shakti and TIES to reduce bottlenecks and improve logistics and infrastructure.
  4. Boost Domestic Manufacturing
     • Fact: “Reducing corporate tax rates and implementing PLI schemes in key sectors can promote manufacturing”.
     • Suggest boosting domestic production through fiscal incentives like tax reductions and promoting industries through schemes like PLI (Production-Linked Incentive).
  5. Move Away from Protectionism
     • Fact: “India should embrace trade agreements and regional arrangements to capitalize on the China-plus-one strategy”.
     • Recommend that India move away from protectionist policies and forge trade agreements to access new markets, especially as global supply chains diversify.

4. Conclusion

• Reaffirm the importance of boosting India’s exports to achieve economic growth and the $5 trillion economy target.
• State how implementing the suggested measures will help India reach its export targets of $1 trillion in merchandise exports by 2027-28 and $1 trillion in services exports by 2030.

Relevant Facts with Sources

1. High Tariffs on Intermediate Goods:
   • “Almost 70% of all anti-dumping duties are levied on intermediate goods”.
2. Traditional Export Basket:
   • “India’s exports do not comprise cutting-edge products; 70% target markets with declining global share”.
3. High Logistics Costs:
   • “India’s logistics cost is about 16% of GDP, compared to 10% in China and 8% in the U.S. and Europe” (Source: Ministry of Commerce).
4. Complex Business Ecosystem:
   • “India faces red tape, complex tax laws, and high non-tariff barriers, such as administrative fees and labelling requirements”.
5. Sector-Specific Approach:
   • “India lacks sector-specific export strategies to fully capitalize on the potential of different sectors”.
6. Decentralized Export Strategy:
   • “NITI Aayog’s report on the Export Preparedness Index encourages states to adopt export promotion policies”.
7. Global Value Chains Participation:
   • “India should increase its participation in GVCs to capitalize on labor-intensive manufacturing”.
8. Export Ecosystem Enhancements:
   • “Initiatives like PM Gati Shakti, TIES, RoDTEP can streamline export processes” (Source: Ministry of Commerce).
9. Boosting Domestic Manufacturing:
   • “Reducing corporate tax rates and implementing PLI schemes in key sectors can promote manufacturing”.
10. Trade Agreements and Regional Arrangements:
    • “India should embrace trade agreements and regional arrangements to capitalize on the China-plus-one strategy”.