Context:
Geographical location plays a crucial role in ensuring competitive trade, a vital factor for overall economic growth. Regrettably, policymakers have not prioritized overcoming geographical challenges and regional disparities, necessitating a shift towards developing each district in such states as an export hub for balanced economic growth.
Relevance:
- GS2- Government Policies and Intervention
- GS3- Inclusive Growth, Infrastructure
Mains Question:
Geographical location plays a crucial role in ensuring competitive trade. Analysing the given statement, suggest a detailed way forward strategy for India to overcome geographical barriers for an enhanced overall economic growth. (15 marks, 250 words).
Important Case Studies in this Regard:
- Haryana, a state carved out of Punjab 57 years ago, has transformed from a barren land with minimal development into one of the top ten states in export values. This transformation is primarily attributed to its strategic geographical advantage, being in proximity to the National Capital Region (NCR), enabling five times more exports than Punjab.
- Similarly, coastal states with access to ports have a more favorable position in international trade compared to landlocked regions like Punjab, which faces higher trade costs and transit challenges from the seas.
Recent Developments in this Context:
- In the era of the fourth digital industrial revolution and e-commerce channels, developing countries have tapped into new opportunities in international trade, meeting the rising demand for goods and services from developed nations.
- The Foreign Trade Policy (FTP) 2023-28 aims to boost India’s foreign trade through decentralized export promotion. The introduction of the Districts as Export Hubs initiative is a crucial strategy within this policy, intending to identify potential export products and services in all districts and establish institutional mechanisms to promote them.
Shortcomings in India’s approach:
- Exports to GDP Ratio: Although India has signed several Free Trade Agreements, with more in progress, providing greater access to export markets, there is a need to raise India’s exports to GDP ratio from the current 22.74%.
- Disparity among States: In the recent Export Preparedness Index (EPI) ranking of states, Punjab is positioned at a low 10th with a score of 58.95, while Haryana leads at 5th with a score of 63.65.
- Gujarat boasts the highest number of eight districts among the top 25 districts in the country in terms of export share (54%), followed by Maharashtra with five districts, Haryana with one, and Punjab with none. To significantly boost exports, states must actively engage in export promotion activities in each district.
Way Forward:
The Case of Punjab:
- Punjab, in particular, possesses untapped potential in unique products across each district. Designating these districts as export hubs would unlock their local potential, fuel economic growth, generate employment, boost rural entrepreneurship, and enhance exports.
- It is high time for Punjab to take necessary steps to actively participate and promote export operations in each district, aligning with the ‘Vocal for Local’ and ‘Make in India’ initiatives.
- Facilitating the flow of bilateral trade from Punjab through Pakistan Territory to Middle-East Countries, CIS Nations to Europe, and the US is essential for boosting competitive trade.
Decentralisation:
To achieve the goal of ‘Atmanirbhar Bharat’ (Self-reliant India), promoting the export growth of local goods and services and increasing local production is imperative, necessitating decentralized export promotion activities.
Success of the Foreign Trade Policy:
- To ensure the success of the Foreign Trade Policy, several strategies are proposed, including creating a robust institutional framework, identifying potential export products, building the capacity of new exporters, conducting outreach programs for export promotion, addressing infrastructure and logistics bottlenecks, and converging government schemes to support these initiatives.
- Establishing a Directorate of Exports in the state to synchronize state and center policies and act as the nodal coordination point for exporters is crucial.
Logistics:
- Given the shift of most trade to global value chains requiring timely deliveries, exporters should be allowed to choose shipment modes based on their business requirements.
- To stay competitive, action must be taken to create an efficient and seamless logistics system for shipping goods to global customers.
- Creating a separate customs code for e-commerce shipments to align with emerging channels is necessary to reduce costs and expedite merchandise delivery by exempting import duties on rejects and treating re-imports as duty-exempt imports, following global practices. It is high time for exporters to be allowed to claim GST refunds.
Districts as Export Hubs:
- Prioritizing the Districts as Export Hubs Initiative with the goal of enabling farmers and MSMEs to benefit from export opportunities in foreign markets is crucial.
- Establishing a district-level ecosystem for innovation and technology utilization to increase export competitiveness and reduce transit and transaction costs for exporters is necessary at various stages of the export cycle.
- Providing platforms for a global reach of products and services from the district will promote local farmers and small entrepreneurs, creating a win-win situation for all.
- Effectively implementing the Districts as Export Hubs Initiative is essential to create a competitive space in the export market.
- While State and District Export Promotion Committees have been formed, they need to function more effectively in disseminating market intelligence, improving quality standards, providing access to international certification industries, and monitoring export performance at the district level.
- The District Export Action Plans aim to identify goods and services for export promotion, employment, and revenue generation to drive local economic growth.
Conclusion:
To boost export orders for high-potential product categories like engineering goods, chemicals, telecom equipment, and processed food items, the focus should be on developing market intelligence, organizing training for MSMEs, and facilitating the fulfilment of export orders. This is essential to stay ahead of the competition.
