India’s export hurdles

THE World Bank’s (WB) latest India Development Update has some good news to offer: The Indian economy continues to grow at a healthy pace despite challenging global conditions. The WB has upwardly revised the growth forecast for the country’s economy to 7 per cent from the earlier projection of 6.6 per cent in the current financial year. The not-so-good news is that India is losing out to competitors like Vietnam and Bangladesh among low-cost manufacturing export hubs. As per the WB, India needs to diversify its export basket and leverage global value chains to reach its $1-trillion merchandise exports goal by 2030.

The report’s unwritten message for India is that there is no room for complacency on the trade front. It is obvious that the ‘Make in India’ push is not really translating into a ‘Make for the world’ success story. And what won’t be music to the Modi government’s ears is the fact that the nation’s share in the global exports of apparel, leather, textiles and footwear has declined from 4.5 per cent in 2013 to 3.5 per cent in 2022. The corresponding share of Bangladesh touched 5.1 per cent in 2022, while that of Vietnam reached 5.9 per cent. No less worrisome is India’s increasing trade deficit (the difference between imports and exports) with China. Amid the military stalemate in eastern Ladakh, Beijing is upstaging Delhi with its no-holds-barred economic muscle-flexing. From umbrellas to musical items and toys, there is no stopping the influx of Chinese goods into India.

Political and economic instability in Bangladesh has given India an opportunity to regain lost ground. The key is to reduce production costs and improve productivity without compromising on quality. Considering India’s reluctance to be part of mega trade blocs, a greater emphasis on bilateral Free Trade Agreements with Western and Gulf nations is the best bet to counter the Vietnamese-Chinese challenge.