Trade winds: What’s trending in the export basket and how to reach the USD1 trillion target

India can further expand its market reach. Compared to the earlier decade, this is now easier considering the country’s push to diversify the exports basket, offering ample opportunities to enter new markets. India’s continuous FTA negotiations are increasing exports. For instance, Since signing trade agreements with the UAE and Australia, Indian exports to the UAE have grown by 13.7 per cent in FY24, making UAE India’s top exporting destination, while Indian exports to Australia also saw a significant 15 per cent rise in the same fiscal.¹² Moving forward, India can identify promising markets—for instance, Africa, which, according to WTO, will see imports growth by 4.4 per cent in 2024—and pursue similar trade pacts.¹³

While PLIs have contributed to Indian manufacturing, there is still room for improvement. For instance, PLI disbursements among eligible beneficiaries in FY24 stand at USD0.81 billion against the government estimate of USD1.3 billion.¹⁴ While there are PLI benefits for 14 sectors, a one-size-fits-all approach has resulted in less success, with the exception of electronics. Hence, to ensure the effectiveness of these schemes, the government can engage with industry stakeholders, who can help in identifying existing gaps and criteria concerns. According to Global Trade Research Initiative (GTRI), the government can also consider simplifying the PLI criteria, making them less stringent and easily achievable. Besides, streamlining processes and further optimising business environment can attract more active investments. The recent announcement of simplifying norms surrounding FDIs and overseas investments in the Union Budget is a welcome move.

The MSME sector—with a 45 per cent export share¹⁵—is crucial for achieving the 2030 exports target. According to a recent NITI Aayog report, the global market for key sectors—such as handicrafts, handloom textile, ayurveda, etc.—surpassed USD340 billion, presenting a major opportunity for Indian MSMEs.¹⁶ Considering this, the government can resolve underlying bottlenecks and provide targeted incentives to boost the sector’s output. For instance, estimates suggest that Indian MSMEs face a credit gap of about USD530 billion.¹⁷ Hence, enhancing credit access, standardising policies, improving transparency and addressing regulatory issues can help the sector formalise and compete internationally. The budget announcements surrounding MSMEs, including easing machinery purchase, a new credit assessment model and direct credit to MSME clusters, will be some supportive measures to resolve these challenges.

MSME exporters also struggle with procedural complications due to multiple portals. If a one-stop end-to-end trade portal is established, this can help in streamlining export processes, resolving queries efficiently and providing essential inputs regarding trading norms, such as tariffs, financial resources and incentives.

While key manufacturing sectors like electronics are growing optimistically, India must also reassess traditional sectors, such as textiles, leather and gems and jewellery where it has an advantage. In recent times, our gems and jewellery exports have declined—down by 9 per cent since FY20¹⁸—and must be revived. Our exporters need to match the efficiency levels of global competitors. For instance, India’s garment exports in 2023 stood at USD14.5 billion, lagging behind China (USD114 billion), Vietnam (USD81.6 billion) and Bangladesh (USD43.8 billion).¹⁹ Let’s take Bangladesh as a case study. Bangladesh saw success in garment exports primarily due to policies developed in consultation with global clothing brands. Additionally, the country enjoys zero tariff benefits with the EU, which is one of its largest importers. So, there are some lessons for India here—we can consider revamping key policy initiatives. For instance, with the Centre planning to enhance the PLI scheme for textiles, thorough discussions with key industry stakeholders can boost the scheme’s effectiveness. India can also leverage upcoming FTAs with the UK and the EU to reduce trade barriers and increase market access. Moreover, these sectors can also benefit from upskilling our workforce, where India already has an advantage.

While India has revamped its export strategy by implementing several enhanced export promotion schemes, it continues to face challenges as major western trading partners have imposed countervailing duties over issues regarding WTO compatibility. To address this, the government can consider thorough analysis and regular interventions to ensure compliance with global trade intricacies. For efficient resolution, maintaining transparency is crucial. Thus, digital literacy and information symmetry can be promoted among exporters, facilitating a streamlined documentation record system. Further, to ensure uninterrupted market access, the government can take measures to simplify policy interpretation at the global stage, which will enhance trust and ensure smooth trade.