In Charts: What India Needs To Integrate Better With The Global Economy
Four charts that show where India lags in the global context.
India, over the past two decades, has grown to become the seventh-largest economy in the world, with a nominal gross domestic product of $2.72 trillion. That was aided partly by its increasing participation in the global economy—now the ninth-largest contributor to global trade of goods and services—especially after its economy was liberalised in 1991, according to a survey by the Organisation of Economic Co-operation and Development.
As Prime Minister Narendra Modi hopes the economy would reach the $5-trillion mark by 2025, the survey pointed out issues that the subcontinent needs to work to seize opportunities from enhanced participation in the global economy.
1) Exports Of Textiles Loses Steam
India’s share in the world’s export of textiles has stalled, despite clear comparative advantage and know-how, the survey said.
India’s textiles industry was estimated at around $150 billion as of 2017-18 and is estimated to reach $250 billion by 2019, according to India Brand Equity Foundation. The sector contributed 15 percent to India’s export earnings in 2017-18.
China’s share of global textile exports is more than eight times that of India.
2) Transport Bottlenecks Weigh On Competitiveness
Addressing domestic infrastructure bottlenecks will be key to support India’s global competitiveness, according to OECD. Currently, it takes more than 45 hours for a shipment of exports to reach the border from a warehouse in Delhi. Similarly, a shipment from Mumbai takes less than 10 hours.
3) Expensive Electricity Hits Business
Businesses face a high price of electricity in India, according to the survey, underlining another infrastructure challenge. Electricity in India is currently more expensive than that in the U.S., Indonesia, China, Canada, Malaysia and Thailand. “Efforts to improve the quality and reliability of electricity provision, roads and ports should continue.”
4) Applied Tariffs Can Be Cut Further
India needs to strive for multilateral trade agreements, or at second best, reduce tariffs further, OECD recommended.
“Import duties disproportionately affect low-income households’ purchasing power and weigh on firms’ competitiveness,” it said. “Although India has preferential trade agreements, their depth is limited.”
The recommendations come at a time when a trade war between the U.S. and China have made way for many emerging economies in Asia to grab export businesses.
To be sure, India’s ranking in the World Bank’s ‘Ease of Doing Business’ index rose 14 spots in the latest survey. India continued to rank among the 10 economies which saw the most significant improvement in indicators tracked as part of the index. As in other economies on the list of 10 “Top Improvers”, the World Bank noted that Indian leaders approached ease of doing business as a core component of their reform strategies.