Can India’s exports trade reach the targeted $2 trillion by 2030?

(The author is a Professor of Management and Economics, formerly at IIBM (RBI) Guwahati. He can be contacted at m.bibhas@gmail.com)

India’s just announced Foreign Trade Policy (FTP), targeting a concentrated push to both merchandise and services exports -detailing plans to lift India’s exports to $2 trillion by 2030 up from $770 billion in the current fiscal year - is no doubt a daunting venture! The FTP 2023 emphasizing on ease of doing business, streamlining of processes and reducing transaction costs - a greater focus on e-commerce exports and bringing on board district and state-level players to raise outbound shipments - raises hopes.

The question is whether we can perform better in the international arena.

What is the position right now?

The latest statistics reveal the fact that exports sector requires an upward thrust so as to make the health of the economy better. India’s merchandise trade deficit in March 2023 stood at $19.73 billion, which was higher than $17.43 billion recorded in the previous month, according to government data released on Thursday. India’s exports rose 6 per cent to $447 billion in 2022-23 as against $422 billion in 2021-22 on account of healthy growth in the outbound shipments of sectors such as petroleum, pharma and chemicals and marine products.

India’s overall exports of goods and services rose to $770 billion in 2022-23, showing a growth of 14 per cent over the corresponding fiscal and crossing government’s annual target. In 2021-22, the exports were $676 billion. The trade target for 2022-23 was $750 billion, which has been exceeded by around $20 billion. Despite recessionary conditions and head winds, India recorded an on-year jump of $94 billion in annual trade. Country’s imports in overall trade grew by 17.38 per cent in 2022-23. Rise in imports was mainly due to a larger inflow of crude products, including petroleum. A rise in imports of coal, coke, briquettes and transport equipment was also seen during the year under review. Imports from Russia grew at a rate of 396.44 per cent, owing to the surge in petroleum imports.

It is good to note that bilateral trade between India and the US rose by almost 8 per cent to $128.55 billion in 2022-23, compared to $119.5 billion in 2021-22. The growth in bilateral trade between the two countries is significant, considering the fact that in 2020-21, it was only $80.51 billion, according to Commerce Ministry data. Exports to the US rose by 2.81 per cent to $78.31 billion in 2022-23 as against $76.18 billion in 2021-22, while imports grew by about 16 per cent to $50.24 billion.

At the same time, India’s bilateral trade with China fell by 1.5 per cent in 2022-23 to $114 billion, compared to $115 billion in 2021-22. Exports to China fell by 28 per cent to $15.32 billion in 2022-23, while imports rose by 4 per cent to $98.51 billion in 2021-22.

India set a target to achieve $750 billion of exports by the end of 2022-23, which is 11 per cent higher than the exports of $676 billion recorded in 2021-22. A significant growth in exports in 2022-23 had come from the sale of petroleum products and electronic goods. It is good to note that mobile exports have increased by 50 per cent in the last fiscal, touching $8.3 billion by January-end.

When exports could move north steadily definitely a good performance would be registered – rise in international competitive strength gets established. In such an assessment vital indicator that are normally used, among others, include: the quality of six different components, including efficiency of the clearance process, quality of trade and transport related infrastructure, ease of arranging competitively priced shipments, competence and quality of logistics services, ability to track and trace consignments and timeliness of delivery.

On this score the benefits of following an appropriate strategy should not lose sight of increased market size; greater returns on major capital investments or new products or processes; greater economies of scale, scope or learning and a competitive advantage through location.

Mention on this score may be made of three strategies hopefully to be followed - multi-domestic strategy (when strategic and operating decisions are decentralized to the strategic business unit in each country to tailor products to the local market); global strategy (that assumes more standardization of products across country markets) and transnational strategy (that seeks to achieve both global efficiency and local responsiveness).

Exports Marketing: A complex process indeed

Keegan nicely stated that ‘the international market goes beyond the export marketer and becomes more involved in the marketing environment in the countries in which it is doing business.’ True, international marketing is the performance of business activities that direct the flow of a company’s goods and services to consumers or users in more than one nation for a profit and international marketing is simply the application of marketing principles to more than one country.

Clearly, international business includes all business transactions involving two or more countries, where these business relationships may be between private individuals, companies, groups of companies, non-profit organizations or government agencies. Though in some ways, international business is an extension of domestic business, but it is different mainly for two reasons (i) international business objectives are likely to be different from domestic business objectives; (ii) the environmental conditions in which international business is conducted are usually of greater complexity than is the case with domestic business. These complexities arise from differences in culture, currencies, legal systems and the endowment of national resources, among others.

Of course, managing an international business is more complex than managing a domestic business. Today’s developments in communication and transportation technology have been facilitating trade worldwide, leading to the cliché that ‘all business is now international business’ - people working in maritime industries are inevitably involved in international business.

Especially, in these days of globalization, autarky is out of date. Every country has to enter into this process of integration and interdependence. Globalization of markets implies that the world is one large marketplace and globalization of production implies that firms locate their production facilities for maximum efficiency and lowest cost, so that products are no longer seen as Indian, Australian products or Japanese or German products, but ‘global’ products in nature. On this score even the staunch critics have to remember that things are changing at jet speed where one technology is fast replacing the earlier one.

But so far India is concerned, changes towards the better can reasonably be expected to be there.

Who thought that in economies like India the airlines will be competing with the railways? The forces that promote more globalization are not to lose sight of (a) the lowering of tariff and non-tariff barriers (free trade); (b) developments in technology (viz. jet aircraftcontainerization, the microprocessor, the Internet and robotics). Who could question today that developments in communication and travel has not made it possible for international business to coordinate its activities and to view the world as a single marketplace?

That is why all of the relevant factors are to be properly scanned before embarking upon a big venture – spreading wings abroad!

Let us watch carefully how the situation would go on and corrective measures become result oriented. Time is running out……