Economic Survey 2020: Export Strategy To Create 4 Crore Jobs By 2025
Making a pitch for large-scale job creation, the Economic Survey for 2019-20 recommends India move aggressively on export specialisation and towards manufacture of ‘network products’ such as computers, electronic and electrical equipment, telecommunication equipment, road vehicles, etc.
“Exports of network products, which is expected to equal $7 trillion worldwide in 2025, can contribute a quarter of the increase in value-added for the $5-trillion economy by 2025,” the survey states.
Lamenting the poor progress made in merchandise exports, the survey notes that India’s share in goods exports has grown at 13.2 percent per annum since the economic reforms in 1991. As a result, the country’s share in world exports has increased from 0.6 percent in 1991 to 1.7 percent in 2018, but that’s a meager expansion when compared to China’s 12.8 percent share in 2018. In fact, imports of merchandise have grown faster, at 14.9 percent per annum during 1993-2018, than exports, whereas in services, export growth has outpaced imports.
It finds that China’s superior export performance has been driven primarily by deliberate specialisation at large scale in labour-intensive activities, especially network products, where production occurs across global value chains operated by multi-national corporations. Whereas high diversification in India indicates it is “spreading its exports thinly over many products and partners, leading to its lacklustre performance compared to China”.
By importing components and assembling them in China for the world, China created jobs at an unprecedented scale, the survey notes.
“Similarly, by integrating “Assemble in India for the world” into Make in India, India can raise its export market share to about 3.5 percent by 2025 and 6 percent by 2030...”
Export Strategy: India Vs China
Analysing India’s export performance, the survey finds that -
Despite labour abundance, the share of traditional unskilled labour-intensive industries in India’s non-oil merchandise exports declined from 30.7 percent in 2000 to 16.3 percent in 2018.
The dominance of capital intensive products in India’s exports along with a low level of participation in global value chains have resulted in a disproportionate shift in India’s geographical direction of exports from traditional rich country markets to other destinations.
High-income OECD and other high-income countries together accounted for 63.9 percent of China’s exports, while that of India was 56.7 percent.
India’s export under-performance persists over two decades when India’s exchange rate depreciated significantly.
The survey points to two groups of industries that have the greatest potential for export growth and job creation.
- There exists a significant unexploited export potential in India’s traditional unskilled labour-intensive industries such as textiles, clothing, footwear and toys.
- India has fared reasonably in exports of four networked product categories — road vehicles, electrical machinery, telecommunication and sound recording equipment and professional and scientific equipment — and can continue to grow these as well as office machines and automatic data processing machines.
It cites India’s relative success in automobile and mobile phone exports to make its point.
Don’t Fear Trade Pacts
The survey also emphasises that India should not fear trade agreements as disadvantageous to it. It finds that manufactured products from India clearly benefited from eight out of 14 trade agreements considered — MERCOSUR, Asean, Nepal, Singapore, Chile, Bhutan, Afghanistan and Japan.
Four of the agreements — SAFTA, BIMSTEC, Thailand and Sri Lanka — had no effect on exports of manufactured products, while the bilateral agreements with Korea and Japan exerted a negative effect.
When the impact of India’s trade agreements on overall trade balance is made by accounting for all confounding factors, India’s exports have increased by 13.4 percent for manufactured products and 10.9 percent for total merchandise, while imports increased by 12.7 percent for manufactured products and 8.6 percent for total merchandise. Thus, India has clearly gained 0.7 percent in trade surplus per year for manufactured products and 2.3 percent per year for total merchandise.Economic Survey 2019-2020