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About seven years from now, by 2030, if all goes to plan, India should be exporting $2 trillion worth of goods. That’s a nearly three-fold jump from the current level of $760 billion to about two-thirds of India’s current gross domestic product (GDP) and broadly about 28 per cent of India’s GDP ($7 trillion) by the end of this decade that many have projected.
This is an ambitious goal, but not implausible. The key component that will fuel acceleration on this path would necessarily entail creating several manufacturing hubs across the country that consistently churn out goods of very high global quality. While maintaining, and progressively raising the standard of goods is necessary, the sufficient condition is that these will have to be cost-effective to make Indian shipments attractive to consumers overseas.
Boosting Exports
Within the overall policy matrix, the sequencing of the Foreign Trade Policy 2023, which does not come with a five-year sunset clause this time, is noteworthy. It comes after the productivity-linked incentive (PLI) scheme that is aimed at creating focused manufacturing value chains. The purpose of the PLI scheme is to create strong incentives for global giants to set up manufacturing bases in India. Besides, these goods that move out from the factory floors powered by the PLI scheme into the highways of global trade, will catapult India among the top rankers of world trade.
The foreign trade policy defines the contours of India’s export flight path on four pillars: (i) Incentive to Remission, (ii) Export promotion through collaboration - exporters, states, districts and Indian missions, (iii) Ease of doing business, reduction in transaction cost and e-initiatives and (iv) Emerging areas – e-commerce developing districts as export hubs and streamlining SCOMET (Special Chemicals, Organisms, Materials, Equipment and Technologies) policy.
For India to make a decisive leap forward, the backward districts have to figure prominently when policymakers sit down in Delhi and state capitals to draw development plans.
Improving Connectivity
The multiplier effect of new world-class infrastructure such as the Poorvanchal Expressway, Delhi-Dehradun Highway, the new Delhi-Mumbai expressway, the Bengaluru-Chennai expressway, and the Delhi-Srinagar expressway spread far beyond the roads’ visible horizons.
The emphasis on seamless multi-modal connectivity through Pradhan Mantri Gati Shakti National Master Plan and national waterways draws from the premise that these will unleash strong economic benefits encompassing logistics and trade. Such active waterways have made large areas of the hinterland accessible to the routes of trade and commerce, making goods from these areas part of the national and global supply chain network, and opening up new markets for everyone—from farmers to craftspeople to factories.
According to global consulting major McKinsey & Company, there are commercial opportunities for companies to tap beyond the current growth centres, which require a smaller and discrete approach.
“To get the most from this granular approach, companies need to develop customised strategies for each geographic sliver. To do so, they must map priority geographic segments to product categories and extensions,” McKinsey said in its 2014 report “India’s economic geography in 2025: states, clusters and cities”.
According to the policy, “the FTP 2023 aims at process re-engineering and automation to facilitate ease of doing business for exporters. It also focuses on emerging areas like dual-use high-end technology items under SCOMET, facilitating e-commerce export, collaborating with states and districts for export promotion”.
State and district-level policies will have to be strategically dovetailed with national goals to reach, if not exceed, merchandise export targets.
The road to India’s export, and indeed higher GDP levels, is through the districts and states that are economically laggards but have the potential to join the trade route through enhanced infrastructure that will considerably cut down the factory-to-port travel time.