India has set a target for goods exports at USD 1 trillion by 2030 and a similar target for services exports with the same deadline. Against this USD 2 trillion target, the country is at USD 766 billion in 2023-24 and has not moved an inch since last year. Our merchandise exports have actually dropped from USD 451 billion to USD 437 billion while services exports neutralised this decline, by expanding from USD 325 billion to USD 339 billion. If the stiff target has to be achieved, it requires a comprehensive export strategy, rather than knee-jerk reactions or ad-hoc measures as we need to nearly triple the present export status to reach USD 2 trillion.
Looking into India's four main trading countries, we have enhanced trade deficits in three cases and only with the USA, India has a trade surplus, as of today. We signed an FTA with UAE last year amidst great fanfare. Against a minor trade surplus of USD 200 million with UAE five years ago, we have a trade deficit of USD 14 billion currently with imports rising to USD 48 billion and exports touching only USD 34 billion, as per the latest GTRI reports. It is for the Commerce Ministry to examine on a six-monthly basis, whether we are on track or whether we have been taken for a ride. Objective analysis is necessary, as signing FTAs in haste, only results in repentance at leisure. This is true of all FTAs based on my experience since 2011, when I joined the Commerce Ministry and hence I don’t propagate any FTA or CECA to pump exports notionally.
With Russia, while our imports have grown ten times from USD 6 billion to USD 61 billion in the last five years, it has been to our advantage as sanctions have allowed us to get Russian oil at substantial discounts, saving valuable foreign exchange. But exports have not risen beyond USD 4 billion despite the huge potential of bilateral trade between us. The result is we have a deficit of USD 57 billion which in real terms is not a matter of great concern as stated above. However, bridging the trade gap through a focused item-wise growth strategy, can help us to exploit the full potential of opportunities, which are staring us in the face, with one of our oldest friends since Independence.
The situation is most alarming concerning China where India's trade deficit is rising steadily every year, despite several attempts and pronouncements of curbing Chinese exports due to various geopolitical reasons. While our exports are more or less stagnant at USD 17 billion for the last several years, there is a huge jump in imports from USD 70 billion a few years ago to USD 102 billion in 2023-24, reports GTRI. The rise is so steep that China has overtaken the USA as our largest trading partner and handed us a USD 85 billion trade deficit. The Commerce Ministry needs to worry about this because knee-jerk reactions are common in dealing with China, as we put restrictions for some time and then withdraw them. As a former DG of anti-dumping, I know for sure that the Commerce Ministry recommends anti-dumping duties to protect domestic industry, but the Ministry of Finance is asked, not to impose the duties, because the trading class close to the party gets hit by more expensive imports from China. This kind of hesitation and fluctuation in dealing with China has hit us badly and continues to agonise us. Trade negotiators need to ensure that we leverage our huge imports from China to push our exports vigorously to a country which can easily absorb them, if we maintain sufficient pressure, in a sustained manner.
As regards the USA, GTRI says that our exports have touched USD 78 billion while imports for 2023-24 reached USD 41 billion, creating a trade surplus of USD 37 billion. A target of reaching bilateral trade of USD 500 billion in five years was set up seven years ago. Unfortunately, very little progress has been made and we are at USD 119 billion only even now requiring a four-fold increase to reach the desired target. Here, I find that the State Department and the Commerce Department of the USA are not able to synergise their strategy, to boost bilateral relations. This is necessary to realise the full potential of the opportunities available.
A detailed analysis, item-wise of our exports will reveal where we have progressed and where we are far behind. Taking figures of 13 main items of exports and comparing data between 2022-23 and 2023-24, I find the following picture emerges:
1. Rice has been a major contributor but due to domestic pressures, it appears that curbs on its exports have reduced it from 11.1 billion to 10.4 billion. While the decrease is marginal, the export potential is huge and hence a marketing strategy needs to be evolved, to realise the huge push that is possible in this item.
2. Marine products again have demand in many parts of the world, but unfortunately our exports slid from USD 8 billion to USD 7.3 billion. Though this is a nominal decline, the opportunities here again are massive as India has a 7,000 km long coastline and MPEDA needs to formulate a comprehensive strategy, duly incentivised, to double our exports.
3. Leather and leather goods were at USD 4.7 billion last year and have shrunk to USD 4.2 billion this year. This is a sector which had set a target of doubling our exports to USD 6 billion, 12 years ago and we are not even at the halfway mark still.
4. Gems and jewellery have been an item of pride in the Indian export basket but appear to have been badly hit with a drop from USD 37.9 billion to USD 32.7 billion in just one year. Sanctions on Russian diamonds cannot be the singular reason for this and hence, it is a wake-up call for the Gems and Jewelry Export Promotion Council to do a professional study and devise a plan to find its appropriate fair share in the global market.
5. Readymade garments also have slipped from USD 16.1 billion to USD 14.5 billion despite the Textile Ministry targeting USD 100 billion in exports of textiles. Delving deeper into this, I find that cotton yarn and handloom products have marginally risen from USD 10.9 billion to USD 11.6 billion, but the manmade yarn has dropped from USD 4.9 billion to USD 4.6 billion and hence, instead of galloping from USD 30.9 billion total textile exports, we have slowed down to USD 30.7 billion. Achieving USD 100 billion requires tripling of our present status which looks infeasible, unless the Textile Ministry pulls up its socks quickly and comprehensively.
6. Petroleum products have taken the biggest hit from USD 97.4 billion to USD 84.1 billion which is inexplicable. Indian refineries have been doing an excellent job of exporting and hence this worrisome situation needs clarity of cause and clarity of purpose, in redeeming the loss, as soon as possible.
7. Leading the products which have shown some enhancement are electronic goods which have catapulted from USD 23.5 billion to USD 29.1 billion in one year, thanks to the huge increase in cellphone exports by Apple and other producers. This needs to be sustained regularly as India-made cell phones are in huge demand in several developing countries.
8. Spices have also shown a more than 10 per cent increase from USD 3.7 billion to USD 4.2 billion. With a huge Indian diaspora, it is possible to capitalise on this in nations where they are stationed and boost exports in a big way. However, lately, there are some chemical-related issues which have sprung up and the Spices Board needs to put its house in order soon to ensure that we don't lose out on exports of this vital commodity.
9. Iron ore, has almost doubled from USD 1.7 billion to USD 3.9 billion, but the government has domestic compulsions on this issue and a collaborative effort with the private players can find a solution to this.
10. Drugs and pharmaceuticals have been growing at a good pace, with a 10 per cent increase over last year from USD 25.3 billion to USD 27.8 billion. India has the highest potential in this sector, as medicines are required globally and India has the largest number of FDA-approved factories. We need to sustain our rigorous quality standards, to reap the harvest of expanding demand all across the world.
11. Engineering goods are the biggest item in our export basket and they have grown steadily reaching USD 109.3 billion, as against USD 107 billion last year. As India gains ascendancy in the manufacturing sector, we can hope for a large increase in these exports provided the Engineering Exports Promotion Council continues to work professionally and exploit all opportunities.
12. Oil seeds have grown marginally from USD 1.3 billion to USD 1.4 billion, but this should not be a focus item as we import vegetable oil to the tune of USD 15-20 billion every year and hence we need to meet domestic consumption first.
13. Lastly, fruits and vegetables have been pushed by APEDA- Agricultural Products Export Development Authority, for a long time and results are now beginning to show that exports crossed USD 3.6 billion as against USD 3.2 billion last year. If we can maintain our packing and pesticide-related quality measures, we can enhance trade very substantially, since we are amongst the largest producers of fruits and vegetables globally.
Consolidating all goods exports figures reveals a drop from USD 451 billion to USD 437 billion, a USD 14 billion decline which may be attributable by some to conflicts and trade route blockages but does not cut real ice, as the plummeting is not uniformly spread over all items. A careful study needs to be done by the Commerce Ministry, to ensure fast action, for reversal of the setbacks of this year.
Moving on to the detailed analysis of our leading import list of 11, I find substantive progress of reduction in seven items and undue enhancement in four, listed below:
1. Coal and coke have shrunk from USD 49.7 billion to USD 38.8 billion which indicates that Coal India has been doing a good job of import substitution. With our large reserves, Coal India should be in a position to reduce our dependence on imported coal, in the forthcoming years.
2. Fertiliser drop is good reaching USD 10.4 billion, as against USD 17.2 billion last year. Boosting domestic production can help to eliminate imports completely, in the next few years, while neglecting it will be at our own peril.
3. Vegetable oil imports were USD 20.8 billion and we have managed to bring it down to USD 14.8 billion, which is a big achievement. It's not rocket science to be self-sustainable in oil seed production and meet the edible oil requirements of domestic consumption if the Agriculture Ministry does a careful study and creates a robust production plan to achieve the desired levels.
4. The fall in petroleum and crude is heartening from USD 209 billion to USD 179 billion. I am not sure if this can be calibrated downwards, unless domestic oil discovery is incentivised, and the big players, including the public sector, can find oil within the country, to meet our needs.
5. Organic and inorganic chemicals have shown a decline from USD 33.4 billion to USD 26.7 billion which is laudable but again needs to be monitored and strategised through organised production plans.
6. Pearls, precious and semi-precious stones display a downward trend lowering to USD 23.8 billion as against USD 30.7 billion in the previous year. This is inexplicable because we are the largest exporters of value-added finished goods in this sector, and hence its raw material supply reduction, appears to be temporary.
7. Lastly, transport equipment has shown a reasonable fall from USD 31.3 billion to USD 26.9 billion, which seems plausible as the Indian auto sector is booming with a large number of big players, contributing significantly to huge expansion, in the last few years.
8. As regards, the four items where there is a substantive escalation in our imports, the most important one is naturally gold, where our appetite never seems to whet. India witnessed a massive import of USD 45.5 billion this year as against USD 35 billion last year.
9. Electronic goods imports have risen from USD 77.2 billion to USD 89.6 billion in just one year. This appears to be largely from China and hence Commerce Ministry needs to carefully study and then take coordinated action, to tone down their volumes substantially.
10. Electrical and non-electrical machinery have shown a slight incline from USD 45.4 billion to USD 48.8 billion. Through the Engineering Exports Promotion Council, this also needs to be studied carefully and imports substitutes found, to prevent further damage.
11. Pulses have almost doubled for no logical reason from USD 1.9 billion to USD 3.7 billion. Agriculture Ministry needs to work on this on a mission mode, so that its production is enhanced domestically, and under the slogan of Amrit Kaal, we do achieve full self-sufficiency.
Aggregating the total imports status, I find an appreciable descent in our bill from USD 715.9 billion to USD 677.2 billion. Since this shrink is much larger than our contraction in exports, the total trade deficit in goods has fallen from USD 264 billion to USD 240 billion which is appreciable.
Juggling and analysing all the trade figures above, I propose a seven-pronged strategy to boost our merchandise exports, if we have to maintain our target of USD 1 trillion by 2030.
a) In the Commerce Ministry, my experience shows that a professional demand estimation study, of our major export basket items, has never been done and reviewed & revised annually. This to my mind is imperative, as part of a larger strategy to bridge our trade deficit. We have all the institutions, resources and talent to do this, and I urge the Ministry to pay full attention if it is serious about its target.
b) About ten Joint Secretaries in the Commerce Ministry have been allocated products and geographical regions to tackle export-related issues. This is an academic input in their task, which needs to be taken seriously as a data-based approach, must replace a knee-jerk reaction-based response. They must tap into the best available talent in the country, to identify products and regions where India’s exports will find ready markets.
c) The Federation of Indian Export Organisation (FIEO), is the overarching body of all prominent exporters of all goods. While it does a lot of awareness building and documentation-related information dissemination and arranges exhibitions in India and abroad for exporters, it cannot shy away from its primary responsibility of a dynamic and resilient export strategy, which it. calibrates, efficiently & effectively, as geopolitical challenges emerge. As a former member of the FIEO Board, I write this with full confidence and authority.
d) There are more than 40 export promotion councils-EPCs, under the Commerce Ministry, the Textile Ministry and MSME. Each of these handles specific products and is designed to be up to date with all related matters concerning them including their pertinent destinations for export. As Joint Secretary,14 years ago, I looked after 4 of these EPCs and tried to professionalize them to the extent that they could take it. In 2024, we cannot have a situation where there is data shortage of any kind, for an export promotion council to flourish and prosper. Commerce Ministry must carefully select the top brass of these EPCs, so that they function professionally, efficiently and effectively, in promoting exports, which is their only mandate.
e) The Commerce Minister chairs an apex body called the Board of Trade with the participation of all possible stakeholders, and all officials responsible for enlarging our exports. A full-day session every quarter is essential to be convened, to brainstorm and generate ideas. Commerce Secretary must then take the lead in implementing the plausible ones, meticulously and promptly. Some disruptive ideas may get us to the elusive target that has been set.
f) The Commerce Ministry spends over Rs 200 crore every year, giving grants to EPCs and other trade-related bodies like CII, FICCI, Assocham etc. to hold exhibitions abroad and showcase India’s product quality and variety. As an Additional Secretary in the Ministry, I used to often enquire whether a cost-benefit study of the grants given to each institution was being done. This is essential for accountability, sound management, and optimal use of resources. If not adequately attended, the exhibitions do not give requisite mileage to our exporters of meeting the right quality and quantity of importers and cutting large deals, which can catapult our exports to the desired levels.
g) Finally, we have Ambassadors in more than 150 countries abroad in regular touch with the stakeholders who demand goods worldwide. A clear-cut mechanism needs to be formalized between the Ministry of External Affairs and the Commerce Ministry so that each Ambassador in his monthly report to both Foreign Secretary and Commerce Secretary, responds to the call to boost India’s exports. Listing of importers, in his country of posting, who are looking for import avenues from India, is vital actionable data. Unofficial and informal systems of the past have not worked, and hence based on my experience of turf wars, a quick settlement of this issue can be achieved through formal orders issued to all Ambassadors by EAM. This can significantly assist in the exchange of vital information, which the Commerce Ministry can act on, to realize its target.
Based on my seven years of experience in the Commerce Ministry, having visited several countries for trade promotion, met hundreds of importers and thousands of exporters and been on the board of several PSUs under the Commerce and Textile Ministry including educational institutes like IIFT, NIFT and FDDI, I have listed a broad strategy above which is practical and doable. All it needs is meticulous attention to detail and regular coordination. I am sure that without the above tenets of the professional trade approach, by the Commerce Ministry, a merchandise export target of $1 trillion is not achievable by 2030.
I may also add that by no stretch of the imagination is the Services export target of USD 1 trillion by 2030, feasible . It involves tripling from $339 billion in March 2024, a no-mean task . The only exception I can think of, is through the possibility of multiple disruptions , caused by new technologies, that are pervading the global environment today.
