Export Preparedness of Northeast States

The Export Preparedness Index-2020 released recently indicates that the north-eastern States are among the least prepared States in India to expand their export footprint. The index developed by the NITI Aayog ranks the States and Union Territories on a range of parameters that are crucial for evaluation of the strength and weaknesses of their existing export ecosystem. India's merchandise exports witnessed growth from $303.5 billion in 2017–18 to $ 331.0 billion in 2018–19. However, in the beginning of the current financial year, the country's exports declined by 60 per cent due to the COVID-19 disruption. India has focussed its attention on strengthening the export ecosystems of its States and Union Territories as it seeks to realize it full export potential to regain its share in the global market. NITI Aayog has examined the existing policy measures, business ecosystem, export ecosystem, and the export performance of the States for developing the index that comprises 55 indicators distributed over these four pillars. Assam has been included in the category "Landlocked States" while the rest seven States including Tripura have been included in "Himalayan States" along with Himachal Pradesh and Uttarakhand. The index report refers to 'North Eastern and Hilly States' but lacks any explanation why Assam has not been considered a north-eastern State. From India's Act East Policy which is critical for expanding export footprint of north-eastern States to policies and programmes of Ministry of Development or North Eastern Region, North Eastern Council, North East Industrial Development Scheme to all the eight States of the region including Assam. These policies have direct impact on business or export ecosystem on Assam which cannot be equated with other major States categorised as 'Landlocked States' where different set of policies apply. Assam ranks ninth among the eleven'Landlocked States' with export preparedness score of 22.81 while Rajasthan tops the list in this category with a score of 62.59. Five major States -- Maharashtra, Gujarat, Karnataka, Tamil Nadu, and Telangana -- account for 70 per cent of India's export. Among the 'Himalayan States' Uttrakhand is the best performing State with an overall score of 48.11 followed by Tripura with 40.79 Manipur is the least performing state with a score of 19.40. Even though the region is showcased to be at the centre of India's Act East Policy the poor indices of export performance of the States in the region show that there is complete disconnect of the policy with ground realities.The report brings out that hill states in the region have performed poorly, due to absence of a State-Centre coordination cell, formulation of definitive measures to gain access to international markets and lack of knowledge among stakeholders regarding the export-promotion measures taken by the State government. Moreover, these States do not have any policy focus oriented towards export promotion. A closer at the rationale behind the four pillars of the export preparedness index will help the States in the region to reformulate their export policies. A comprehensive trade policy provides a strategic direction for exports and imports, it also looks into dimensions that will shed light on the exact measures and policy mechanisms that States have adopted to enable exporters to be competitive. An efficient business ecosystem can help states attract investments and create an enabling infrastructure for individuals to initiate startups. This particular pillar sheds light on the core infrastructure facilities, and how States fare in terms of creating such an ecosystem, the report explains. An enabling export ecosystem, on other hand can support different firms in all the States and Union Territories to increase productivity and boost competition while growth of exports and export diversification are critical to measure the export performance of the States. The country has focussed on the evaluating its export potential capacities at sub-national level as the growth exports is crucialto reduce the current account deficit and attract investments within the domestic manufacturing and services sectors.The benefits of focusing on increasing exports are multi-fold with the most critical being, its contribution to the Gross Domestic Product, the report states, and adds that while it is imperative to accelerate domestic demand to promote higher consumption and investment, it should also be recognised that an economy with only $ 2,000 per capita income will not be able to expand simply based on domestic demand. Moreover, too much focus on domestic demand might strengthen imports faster than exports, which could potentially lead to a widening deficit. The index report is a ready reference for the States in the region to understand as to what went wrong in past over nearly three decades of India's policy for engagement with the vibrant South East Asian economy and also its engagement with south Asian neighbours. The region will miss the bus if timely corrective measures are not taken.