Is 2 Trillion Dollars Exports Target Too Ambitious?

In such a situation, while India has so far achieved the target of $767 billion, reaching $2000 billion in the next seven years, does not seem to be impregnable target. But the country will have to make continuous efforts for the same. — Swadeshi Samvad

According to the foreign trade policy announced on March 31, 2023, goods and services exports target of $2000 billion by the year 2030, has been fixed. Due to the lackluster performance of our exports so far, many experts are expressing doubts about this ambitious target. But at the same time, a large section of economists, in the country is not considering this goal as non-achievable. In fact, some people also feel that the country can achieve much more than this. What are the arguments on both sides.

Ten years ago, in 2012-13, India’s export of goods and services were only $452.3 billion. After 2012-13, our imports grew at much faster pace, but the exports growth has been slowing down since then.

In 2021-22, though our exports of goods and services had reached $683.7 billion, imports had reached $765.6 billion. According to Commerce minister Piyush Goyal, exports could also hit $767.0 billion this year, though imports may also reach $882 billion this year.

Over the last 10 years, we see a meagre growth of only 3.27 percent in export of goods annually, but the rate of growth of services was better at 5.94 percent. Overall, exports of goods and services did not grow very fast in the last 10 years. But growth of exports of goods and services was much better at 11.3 per cent last year. That is, while earlier the target of $1000 billion in 2030 seemed insurmountable, to achieve the target of $2000 billion in 2030, the country will have to keep the pace of export growth at only 14.81 per cent, which is not very much above what we achieved last year.

State of the economy

Today, when all the countries of the world including India are suffering from rising inflation, the rate of inflation in India is still less than the rest of the world. India continues to be the fastest growing economy in the world. The effect of increasing growth is visible in the receipts of GST. Though, import duties account for a major chunk of GST receipts, value addition on imports of intermediate goods is also causing a rise in GST. That is, whether it is growth of GDP or curb on inflation, situation in the economy has been pointing towards the increasing export possibilities of the country.

How can we increase exports?

It is true that increasing exports is a challenging task due to the decreasing purchasing power due to the ongoing economic crisis and inflation in the world. Despite this, the growth in India’s exports of services and goods is of special importance.

The increase in exports of food items has had a significant contribution to the total exports. Food exports surpassed USD 50 billion in 2021-22. Figures for 2022-23 are yet to come, but food exports still make a significant contribution to total exports.

Significantly, till now India has been more dependent on imports in the field of defence. But due to the progress made in the defence industry and especially the increasing contribution of the private sector in the defense industry, the country has not only become self-sufficient in defence equipment, but the contribution of this industry has also increased in exports. While the country used to get 70 per cent of its defence requirements from imports, it now depends on imports for only 32 per cent of equipment and 68 per cent of defence procurement is made from India.

Defence exports have grown by more than 10 times in the last 6 years, indicating the potential for exports from this sector in the future. Significantly, in 2016-17, defense exports were only Rs 1521 crore, which has increased to Rs 15920 crore in 2022-23. It can be said that India’s defense industry is saving foreign exchange on the one hand and earning foreign exchange on the other. The defense industry is witnessing a lot of vibrancy on the back of rising foreign orders.

India has been making big strides in the service sector for the last 30 years, but its importance has increased more in the present times. Within 5 years, our exports of services have grown from $164.2 billion in 2016-17 to $254.5 billion by 2021-22. These exports have reached $296.9 billion in the first 11 months of 2022-23 and are expected to cross $325 billion for the full year 2022-23. It’s a significant fact that software exports account for more than half of these exports. Apart from this, the country has also been exporting many types of business services including BPO, LPO, KPO etc. in large quantities. The progress in the country’s software is leaving behind other countries including China.

Rupee payment can change the trade scenario

Many countries of the world which were interested in importing from India earlier; were not able to do so, due to paucity of dollars. Recently the Reserve Bank of India, through a circular allowed settlement for import and export in rupees. After this, settlement of trade with Russia has started in rupees for the first time in December. So far, thanks to the efforts of the Government of India, Indian banks have opened ‘Special Vostro Accounts’ with regard to 19 countries including England, New Zealand, Germany, Malaysia, Israel, Russia and United Arab Emirates. With these 19 countries still exporting hugely to India, if are paid in rupees, will now have large stock of Indian rupees. It is believed that many countries who were constrained due to paucity of dollars and other popular international currencies like pound, yen etc., will now be encouraged to import more from India, using their export earnings in rupees.

Better competitiveness

In the past, Indian goods had been lacking competitiveness vis a vis other countries of the world, due to the lack of infrastructure. For some time now there is no shortage of electricity in the country and industry has been enjoying uninterrupted power supply. There is some reduction in the cost of electricity also, due to solar power etc. Roads, railways and waterways have changed the infrastructure scenario in the country. Better digital infrastructure is also improving India’s competitiveness.

In such a situation, while India has so far achieved the target of $767 billion, reaching $2000 billion in the next seven years, does not seem to be impregnable target. But the country will have to make continuous efforts for the same. Manufacturing in the country will have to be strengthened, costs of production and transactions needs to be reduced and the current pace of infrastructure construction be maintained. Fact is that in the year 2013-14, India’s GDP was just less than 2 trillion US dollars, and exports were little less than 500 billion US dollars; when the size of Indian economy is expanded to nearly 3.5 trillion US dollars and exports are 767 billion US dollars, in 2030 when we become a $7 trillion economy, export target of 2 trillion US dollars looks well achievable.          

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