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Export Preparedness Index 2020 (3 September 2020)

Export Preparedness Index 2020 (3 September 2020)

Why in News:

Gujarat has topped the Niti Aayog's Export Preparedness Index 2020 followed by Maharashtra and Tamil Nadu in the second and third place respectively, according to the government think tank's report released last week.

Context:

According to the report, six of eight coastal states feature in the top ten rankings, indicating the presence of strong enabling and facilitating factors to promote exports. Among the landlocked states, Rajasthan has performed the best, followed by Telangana and Haryana. Among the Himalayan states, Uttarakhand topped the chart, followed by Tripura and Himachal Pradesh; the report said adding that across Union Territories, Delhi has performed the best, followed by Goa and Chandigarh. The report noted that Chhattisgarh and Jharkhand are two landlocked states that had initiated several measures to promote exports.

Background:

India's merchandise exports have witnessed growth from USD 275.9 billion in 2016-17 to USD 303.5 billion in 2017- 18, to USD 331.0 billion in 2018-19.

India's share in global merchandise exports and services was 1.7 per cent and 3.4 per cent, respectively.

The country's exports dipped by 2.39 per cent to USD 159.57 billion during April-September 2019-20.

The COVID-19 crisis dealt a major blow to the current fiscal. Consequently, India's exports shrank by 60 per cent in April 2020.

Summary of the Debate

About the Report:

  • There are several things which this report has focused on, amongst them the 4 major pillars are:
    • Policy: The existing policy framework and the institutional framework which support the export.
    • Business Ecosystem: The largest weight is of Business Ecosystem and that includes various factors such as transport connectivity, general infrastructure, access to finance, etc.
    • Export Ecosystem: It includes export ecosystem.
    • Export Performance: It is about export diversification and what kind of growth the states have been showing in the recent past in terms of export.
  • The index also took into consideration 11 sub-pillars:
    • Export Promotion Policy
    • Institutional Framework
    • Business Environment
    • Infrastructure
    • Transport Connectivity
    • Access to Finance
    • Export Infrastructure
    • Trade Support
    • R&D Infrastructure
    • Export Diversification
    • Growth Orientation

Performance of the States:

  • Gujarat has topped the Niti Aayog's Export Preparedness Index 2020 followed by Maharashtra and Tamil Nadu in the second and third place respectively.
  • Landlocked states: Rajasthan has topped the index, followed by Telangana and Haryana.
  • Himalayan states: Uttarakhand topped the index, followed by Tripura and Himachal Pradesh.
  • Union Territories: Delhi has performed the best, followed by Goa and Chandigarh.
  • The report noted that Chhattisgarh and Jharkhand are two landlocked states that had initiated several measures to promote exports.

             Rajasthan ranks 4 in Export Preparedness Index-2020 | RajRAS - Rajasthan RAS

Challenges:

  • The worrying area is on export infrastructure.There are intra- and inter-regional disparities in export infrastructure.
  • Poor research &Innovation infrastructure
  • A lot of the import dependent export items from India are facing a supply chain kind of challenge.
  • There is a poor trade support and growth orientation among states in terms of export promotion.
  • The index has not covered services sector and India have about $ 250 billion worth of export in services in the last year as compared to $ 320-350 billion from merchandise export.

Way Forward:

  • It is necessary for every states to take the best from other states and the states can transform the export from this country as a whole, because no matter what the centre does unless the states work in partnership and in support with others, there will not be any significant growth or diversification in the export basket.
  • Cooperative federalism ha to come out in its full strength taking the best out of the competitive positions and overall enhancing the competitiveness India. Combining states and Centre effort will be exponentially more powerful.
  • India should focus on research and innovation and improving infrastructure and raising productivity by skill development.
  • India has to be part of the global value chain and for that it is need to ensure that states work well together.
  • The private sector can also play an important role in export promotion.
  • There is need to promote the quantity of the products.
  • There is also need to focus on value addition.
  • The services export of India has huge potential and they are growing very fast so there must be an Export Performance Index for services as soon as possible.

Important points made by the Guests

Dilip Chenoy, Secretary General, FICCI  

  • The export is critical aspect of the development of any economy. The report talks about those economy and those states that are performing well on the trade fund are actually performing in competitive front, they are adding more value, they are going faster and 50 percent of the export are limited to very few states as pointed out by the report.
  • The government has point out the different parts of the report, they did the review of the export policy, they have launched the agriculture export policy, for the first time Prime Minister talked about ‘Make in India for the world’.
  • As per given geopolitical situation where people are looking for an alternate supply chain and alternate value chain, India has to take advantage of this in going forward and in that context this report is very critical for two reasons; (a) It actually ranks the states in order of their different pillars and sub-pillars and there are many interesting nuggets in the report which could actually act and serve as a best practice for the other states; (b)The interesting things in this report could be used for and actually promote from different states and if each states takes the learning and applies it, it will be very valuable.
  • There is immediate kind of requirement to quickly put in place and expand the full thing of reimbursement of locally embedded taxes.
  • The agriculture export is a big opportunity, although there was Agriculture Export Policy announced and the report does mention it but over the last one and a half years it could not executed because the back ended reforms about the APMC and the Essential Commodity Act were not in place.

Jayant Dasgupta, Former Ambassador, WTO 

  • As far as coastal states are concerned, there is a mix of good policy because out of 8 coastal states, 6 of them figure in the top 10. So, that is indicative of the fact that they have export well in first two pillars that is policy framework and the business ecosystem.
  • Against an index of 100, the county’s index is only being an average of 39, in which the first two pillars which is the policy framework and the business ecosystem have done reasonably well in many states and where it has lacked behind is in the export ecosystem and in the export performance. The R & D support for instance, the diversification, these are few sections where we have not done well and the finance availability is just 0.6 percent which is very low and it goes only up to a maximum of about 6.5 percent in the best states.
  • Most of the coastal states are highly industrialised, they have diversified to a great extent and they also have access to port and airports for export. They have also taken initiatives in various aspect such as policy framework, business ecosystem, in terms of making ease of doing business, there is less interference in terms of the bureaucracy, in terms of providing facilitation rather than interference. 
  • The exports have come down radically in the first three months of the financial year but that is to be expected, but more alarming is that the WTO have projected that the export will go down during the year between 13 to 32 percent, those limits seems to be the one towards which trade is gearing to.
  • If government keep doing the same thing and focusing only on labour intensive industry that is low value addition, we can not go much ahead and we are going to stagnate.
  • One of the things which report has highlighted that there is a scheme called; Trade Infrastructure for Export Scheme (TIES), only 9 states shave got their projects approved in export infrastructure improvement. Now that is something which is lacking in most of the states to lesser extent perhaps in the coastal states but to much greater extant in the landlock states and Himalayan states. So, that needs to be taken care of on priority basis.
  • This is going to make the state aware where they stand viz-a-viz with other states viz-a-viz the best performing states and not only provides avenue for them to try to improve their own performance but they can also adopt the best practices in other states and improve.

Pankhuri Dutt, Public Policy Consultant, Niti Aayog  

  • There are 4 pillars and 11 sub-pillars in this index and many more parameters have been put to evaluate states, it includes infrastructure, access to finance, transport, policy preparedness, etc.
  • The report ranks India’s export preparedness as a whole and it also categorises states in 4 different categories.
  • The report has listed every single state in different parameters and it allows the states to look at its performance individually on every sub-pillar and then judge where it stands and what it can do to improve.
  • The report also points out about the need for enhancing the export insurance and guarantee coverage.

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