September 30, 2020
Exports are an important growth driver for India, despite having a huge domestic market.
Favourable policies over the years help in boosting the growth of the export market.
A focus on digitisation, R&D and innovation will drive growth in the post-COVID era.
In May 2020, despite lockdown effects, India’s export market was valued at US$ 28 bn.
Exports from India have been growing over the years. From 0.6% in 1991, India’s share in world exports went up to 1.7% in 2018. In 2019, Indian businesses shipped goods worth US$ 322.8 bn around the globe. Countries such as the USA, UAE, China, Hong Kong, Singapore, UK, Netherlands, and Germany featured among the top importers from India.
The top export goods ranged from mineral fuels, gems and precious metals, machinery, organic chemicals, vehicles, pharmaceuticals, electric machinery to clothing, accessories, knit or crochet clothing. India has also been emerging as a leading exporter of information technology and related offerings. Export value of IT software and services from India grew from US$ 44.8 bn in FY2009 to US$ 136 bn in FY 2019.
With the COVID-19 pandemic spreading across several countries, the global economy has been deeply impacted, and India is no exception. Predictably, the pandemic has impacted Indian exports too. India’s exports saw a record month-on-month drop of 60.28 per cent in April 2020. With the exception of iron ore and pharmaceuticals, most sectors saw a decline.
Pharma was one sector that saw considerable growth as India played an important role as the ‘pharmacy of the world’ in the fight against the COVID-19 pandemic. Indian pharma manufacturers helped meet the demand for drugs such as paracetamol and hydroxychloroquine, in addition to other life-saving drugs. As per the Pharmaceutical Export Promotion Council and the Ministry of Commerce, drug and pharma exports rose to US$ 2.04 bn in May, as compared to US$ 1.6 bn in the same month last year.
Exports are an important growth driver for India, despite the country having a huge domestic market. Therefore, there need to be adequate measures in place to further boost exports post the pandemic.
Over the years, the Indian government has taken several steps that have helped bolster growth in exports. For instance, they simplified the extant policy on FDI to enable greater ease of doing business to attract more FDI. It also ratified the WTO’s Trade Facilitation Agreement. Such steps have proved to help to boost exports over the last few years.
Still, there is a lot of work to be done, especially when it comes to boosting India’s export preparedness to help it leverage the demands of the post-COVID world. The Export Preparedness Index (EPI) 2020 that examines the export ecosystem of Indian states and union territories puts India’s average score at 39 out of 100. The study reveals factors such as lack of export infrastructure, basic trade support, and access to financial facilities and credit as some of the drawbacks impacting export preparedness in several Indian states. Therefore, there is tremendous scope to act on these issues and boost India’s growth.
There has already been some progress in this direction. Recently, Finance Minister Nirmala Sitharaman announced certain measures to boost the export potential of MSMEs that contribute 50% to Indian exports. She revised the existing MSME definition such that manufacturing and service MSMEs are defined under a common metric. This will enable both manufacturing and service MSMEs to enjoy similar benefits and empower them to drive even greater exports.
One of the heartening side effects of the pandemic and the subsequent lockdown has been that it has brought the tremendous potential of digital technologies to the fore. Information technology played an important role in allowing for information exchange and enabling remote working wherever possible during the lockdown.
The pandemic has accelerated the pace of digitisation across industries and created a disruption in business models. It has also forced businesses to explore new ways of doing business given the constraints of the lockdown and social distancing requirements. Businesses will continue to accrue the many benefits of these innovations even when the COVID-19 pandemic runs its course.
As the world becomes increasingly globalised, the demand for quality products and innovative solutions is only set to grow. A growing focus on R&D will help move further up the value chain and deliver more premium, cutting-edge products and services that can improve the quality of life in India and the entire world.
Exports can prove to be the bedrock that boosts India’s emergence as an economic superpower. With the right investments in regional infrastructure and a supportive policy environment, Indian exports are set to increase steadily in the post-COVID world.