Union Commerce and Industry Minister Piyush Goyal on Wednesday reaffirmed the government’s commitment to an ambitious export target of $1 trillion by 2025. This is an enormous expansion over India’s current achievements in this domain. In the last full financial year, India’s merchandise exports were less than $320 billion, down from over $330 billion in the previous financial year. (Services exports were $214 billion.) In other words, if the government’s target is for merchandise exports alone, then they will have to triple by 2025. However, if the 2025 target of $1 trillion includes services exports, even then merchandise exports will need to about double in five years. Given the current state of private investment in India, alongside the shadow over the world economy, this much is a tall order.
However, the fading likelihood of achieving this goal should not take away from its importance. There is no question that multiplying India’s role in world trade, and through its export component increasing national income sustainably, is the only true path to prosperity available at the moment. However, given the policy context, most observers would assume that no real attempt to raise exports sustainably is in fact being made. If anything, the government has shifted into protectionist, import-substitution mode. The rejection of the Regional Comprehensive Economic Partnership (RCEP) by the government last year — the RCEP
came into force recently with most major economies of the region, but without India — is emblematic of this new concern.
The desire to protect domestic producers from competition won out over the possibility of discovering and growing new export markets. But losing out on the RCEP
means that India will now not have preferential access to the fastest-growing destinations for global exports in the world. The countries in the RCEP
accounted for nearly 26 per cent of global imports in 2019, which was an increase from 22 per cent in 2009; in contrast, the share of North American economies in world imports barely shifted during the period, and that of Western Europe fell substantially. In other words, the RCEP countries are the export destinations of the future, and Indian exporters have been denied preferential access to them.
It has been reported that, at the Board of Trade meeting on Wednesday, the Federation of Indian Export Organisations requested the government to “aggressively pursue” more free trade agreements. It is certainly the case that being left out of any of the preferential-access mega blocs will harm Indian exports.
But the fact also is that new mechanisms for boosting domestic production, such as sector-specific production-linked incentives (PLIs), make it harder for any country to come to a proper and comprehensive agreement with India. The proliferation of PLIs across the economy suggests that the government is not serious about competitiveness in export. Even with relatively enthusiastic partners like the European Union, the government has continued to stress that it is unwilling to sign a comprehensive trade deal. In such circumstances, there is no point in reiterating the ambitious exports target until the government starts improving Indian exporters’ access to world markets.