Trade to boost India’s growth

  • IASbaba
  • June 2, 2022
  • 0
Print Friendly, PDF & Email

Context: Exports can help Indian economy reach the $5-trillion target sooner than expected.


  • India’s exports surpassed the pre-pandemic level of $331 billion in FY 2018-19 and reaching $418 billion in FY 2021-22
  • Total exports, including the services exports of around $240 billion, amount to more than $650 billion.
  • Total merchandise trade, including imports of $610 billion, amounts to $1.28 trillion for FY 2021-22.

What the above stats indicate?

  • The revival of exports has provided relief at a time when major components of aggregate demand such as consumption and investment had been slowing down.
  • These milestones on the trade front are a sign of a rising India, which would certainly accelerate the growth
  • If India sustain the momentum and capitalize on exports’ potential, this will help achieve the $-5 trillion economy goal sooner
  • The trade achievements are a sign of growing confidence in the Indian economy

Reasons for this achievement

  • The proactive policy schemes by the government — such as merchandise exports scheme, duty exemption scheme, export promotion capital goods, transport and marketing assistance scheme — have helped the export sector.
  • Schemes like the gold card scheme and interest equalization scheme by RBI and the market access initiative by the export promotion councils are helpful

Export Potential of India

  • Though achievements in trade are laudable, India still has much potential. For example, the annual growth rate of India’s exports between 2011 to 2020 is a little over 1 per cent compared to 3 per cent and 4.2 per cent, respectively, for China and Bangladesh.
  • There is a huge difference in India’s exports potential and actual exports in many sectors, especially pharmaceuticals, gems and jewellery and chemicals.

What needs to be done?

Policy reforms

  • India has to aggressively increase its participation in global value chains (GVCs) with its best endowment of working-age population and its strength in labour-intensive manufacturing
  • As the Economic Survey (2019-20) suggests, “assemble in India”, particularly in network products, will increase India’s share in world exports to 6 per cent and create 80 million jobs.
  • It is time to find out and research why MNCs are (re)locating to countries like Vietnam, Bangladesh and Mexico when India offers a big market and cheap manpower.
  • State-level reforms in reducing red tape and complex laws including taxation will go a long way.

Institutional Reforms

  • India also needs to work on institutions facilitating trade, processes for exports and imports and logistics that not only reduce trade and transaction costs but also ensure reliability and timely delivery, which is important to becoming part of GVCs.
  • India’s rank in the logistics performance index is 44 while China’s rank is 26 and South Korea’s 25.
  • The unit cost of a container of exports is significantly higher for India compared to China, South Korea and others, thereby reducing the price competitiveness of India’s exports.

Signing FTAs

  • One way to reduce the complexities of trade and business is by signing free trade agreements.
  • These not only reduce tariffs and give market access but bring down non-tariff barriers such as administrative fees, labelling requirements, anti-dumping duties etc

Focus on Service Exports

  • As per the Ministry of Commerce (MoC), services exports are expected to reach the target of $1 trillion before the deadline of 2030.
  • India has done well in IT and IES exports and it can accelerate services exports in other categories including travel and tourism and business, commercial and financial services

Capitalize on opportunities arising out of geopolitical conflicts

  • India must utilize opportunities arising out of geo-political conflicts and the intention of the world to diversify its supply chain portfolio.

Source: Indian Express

For a dedicated peer group, Motivation & Quick updates, Join our official telegram channel –

Subscribe to our YouTube Channel HERE to watch Explainer Videos, Strategy Sessions, Toppers Talks & many more…

Search now.....

Sign Up To Receive Regular Updates