Opinion | ‘Industries of Export Excellence’ Can Bolster New Foreign Trade Policy

Export plays a pivotal role in the economic development of a nation. To give impetus to export, the long-awaited new Foreign Trade Policy (FTP) which came into effect on April 1, 2023, has set a target of achieving $2 trillion in exports by 2030 and seeks to integrate India further into global value chains as an export hub. The FTP has added four new ‘Towns of Export Excellence’ (TEE) in addition to the already existing 39 TEE.

In the country of 766 districts, only 43 towns of export excellence get leverage of fiscal incentives for global market surveys and brand promotions, setting up warehouses, and import of capital goods at zero customs duty for export-oriented production. These biased efforts dilute the concept of ‘One District-One Product’ and ‘Sabka Saath, Sabka Vikas, Sabka Vishwas.’

Therefore, a holistic approach has become more important than ever which focuses on syncing, streamlining, and synergizing foreign trade policy objectives while simultaneously ensuring its compatibility and coherence with the global trading system. Thus, significant changes and refinements are needed to make the new FTP suitable at the policy level as well as for EXIM (Export-Import) operations.

The new Foreign Trade Policy 2023-2028 has set a goal to make India a $5 trillion economy. It needs to go beyond its standard format, which has remained unchanged since the policy was introduced in 2004. Instead of a few TEE with products like handicrafts, hosiery, handloom, apparel, etc, the focus on ‘Industries of Export Excellence’ (IEE) is needed. There is a need for policy rationalisation to level the playing field for export-oriented industrial sectors, which can offtake directly in the export market at large.

For expansion in foreign trade, the government must assess the demand for key products in the global market, to ensure export volumes, values, scale, and intensity. The new FTP should incorporate a plan to identify and promote the key sectors like textile and apparel, bicycles, auto parts, tractor, engineering goods, hand and machine tools, and agri-products like basmati, fruits & vegetables and dairy products.

Export Share and Scope

Still, India has been struggling to raise its share of global export of merchandise to 2 percent. World’s largest milk producer, with a 24 percent global share of milk production but less than 0.5 percent of world dairy exports from India. The second-largest producer of fruits and vegetables in the world, a food-surplus economy failed to export its valuable surpluses.

Basmati: Having a 65 percent share in the global market, India is the leading exporter of basmati rice, of which Punjab holds a 45 percent share. There is huge scope to diversify from non-basmati to basmati to tap the new global markets as there is a gap in the export of both commodities as 39.50 lakh tonnes of basmati rice exports with forex earnings of Rs 26,417 crore during 2021-22, whereas non-basmati export was 72 lakh tonnes worth Rs 45652 crore in the same period. Still, there is huge scope to tap the new global markets for basmati rice export.

Textile and Apparel: The size of the Indian textile and apparel market is estimated at $153 billion, 70 percent of which is domestic consumption while exports constitute 30 percent. India’s share in the global export market is 5 percent, while China is the largest supplier of textile and apparel with a 37 percent share followed by Bangladesh with 7 percent and India stood as the 4th largest supplier. USA, UAE and UK, Germany, France, and Australia are potential export markets.

Tractor: In the global market of 30 lakh tractors annually, India’s production share accounts for 33 percent, over 10 lakh units in a year. Germany leads as an exporter in the global market with a 16 percent share while India’s share is still 2.2 percent. Out of 10 lakh total production, around 9 lakh units were sold in the domestic market while 1.31 lakh units were exported in 2022. With a share of 34 percent, Sonalika is the largest exporter from the county. Still, the potential export markets for India are the US, Brazil, Argentina, Turkey, SAARC, and African nations which can lead to over export of 2 lakh tractors in the next 2 years.

Auto Parts and Engineering Goods: The top five major exporters are Germany, China, the US, Japan, and Mexico accounting for 54 percent of the global auto parts market. As per the Automobile Component Manufacturers Association (ACMA), the export share is 25 percent of the total turnover of 5.10 lakh crore, and the global share is 11 percent. Strong international demand and resurgence in the local original equipment manufacturers (OEMs) and aftermarket segments are predicted to help the Indian auto component industry grow in the global market.

Bicycle: China is dominating the global market and exports 60 percent of its production of 10 crore bicycles. 6 crores are exported across the world in a year. India is the world’s second-largest manufacturer of bicycles, still far behind China in terms of exports, and out of two crore production, only 10 lakh bicycles are being exported which is merely 5 percent of the total production. The potential target is to increase share in the global market by at least 10 percent in the next three years because still there is huge potential to cater as the US, European countries, and Africa have surged as bicycle and e-bicycle markets.

Sports Goods: Accounting for a share of 42.2 percent in global exports, China is the largest exporter of sports goods while India accounts for 0.56 percent of global exports. The significant headroom for India’s sports goods industry in the future is to tap the potential countries like the US, UK, Brazil, Germany, Mexico, South Africa, Columbia, and Argentina.

Way Forward

The way forward is to fuel the spirit of ‘Local Goes Global’ and to galvanise the country to become an export hub by identifying products and services with export potential. The potential of export at the district level and conducting outreach activities, including buyer-seller meets, and trade fairs can onboard a greater number of exporters and importers.

While some districts in India are already known for their exports, the new measures will widen the scope of outreach and potentially onboard previously excluded exporters. Exports from MSMEs and remote districts will not only have positive cascading effects on the economy but also on the livelihoods of millions of people.

India has set an export target of $900 billion in FY 2023-24. To achieve this target, it must orient towards the pillar industries intending to focus on the untapped export potential to be part of India’s export success story.

The writer is Vice-Chairman of Sonalika Group, Vice Chairman (Cabinet minister rank) of Punjab Economic Policy and Planning Board. Views expressed are personal.