As a difficult financial year comes to an end, the government is stepping up its efforts to prepare a sectoral action plan for India’s battered exports, which can be put in motion quickly.
Sources say that multiple ministries will soon send their plan to boost exports to the Commerce Department.
The sector-specific action plan will focus on short-term targets and specific strategies to boost the outbound shipment of certain products in the near term. “The action plans would also be included in the upcoming Foreign Trade policy (FTP) for 2021-26,” a Commerce Department official said.
The FTP is expected to go live from April 1.
Need for action plan
Right now, India’s share of exports continues to remain high in goods which are less traded and low in goods that are traded more in the world. “The FTP has focussed on sectors where India has a lower export share, globally, as compared to what it should have optimally,” a senior official said.
Also, official statistics reveal that the slowdown in labour-intensive sectors such as leather, apparel and gems may take a longer recovery time than others such as engineering goods. The NITI Aayog has suggested that expanding the basket of products and targeting newer export categories and markets is the need of the hour.
As global supply chains are redesigned in the aftermath of COVID-19, China is giving up more and more of its export share in low-skilled products such as apparel, footwear and furniture. While India is keen to corner an increasing share of this open market, it is also focussing on a new generation of high-value, growth-oriented exports such as electronics, machinery and e-vehicles in the FTP, the official added.
After hitting a historic low during the nationwide lockdown last year, India's merchandise exports have made a steady recovery back to the growth charts over the past three months. Now, policymakers say the recovery has been sooner than expected due to timely government intervention, but economists, on the other hand, are less sure. They predict that the sector has a long way to go before it again comes back to its pre-pandemic-level growth.
India’s merchandise exports grew for the third straight month in February, but by a marginal 0.67 percent. The latest data on India's foreign trade, released earlier this week, gives more credence to the prediction of economists and exporters that a strong and consistent growth in the sector will take some time to emerge.
The latest pace of rise has slowed down from January’s 6.16 percent growth as trade in major foreign exchange earners such as petroleum, gems & jewellery and engineering goods continued to take a hit.
“Although a favourable base effect will push up the growth of both imports and exports in March 2021, we expect trade deficit to widen to $13.5-14 billion in the ongoing month," Aditi Nayar, Principal Economist at ICRA, said.