New trade policy: Agony and ecstasy on the road to $2 trillion exports

Liberalised procedures, a thrust on using the Indian rupee for international trade settlements and digitisation to simplify procedures, pushing small businesses to vie for the export pie through measures including setting up of district exports hub, and even a one-time amnesty scheme — India’s latest foreign trade policy—has that ‘go big or go home’ flourish the Modi government is known for, written all over it.

From April 1, the day the new policy with no expiry date comes into effect, we will get to see whether regulatory bodies, exporters and manufacturers will be able to walk the talk. The target, indeed, is super size: Indian exports to scale $2 trillion in value by the end of the decade.

To put this in perspective, India’s exports is estimated to stand at $0.7 trillion right now. The question is, can we aim for a near tripling of our exports in just seven years?

The target, similar to PM Modi’s total GDP target of $5 trillion by 2025 (GDP is presently around $3.5 trillion) comes even as the World Trade Organisation has predicted that global trade will slow down by one per cent this year.

Himanshu Tewari, partner with the consultancy firm KPMG in India, billed the policy “aspirational” for aiming for a $2 trillion export target over the next decade. His colleague Abhishek Jain commented that the policy was “being watched closely by industry and seems to be largely appreciated by stakeholders.”

That is an understatement. Indian industry has been exuberant, arguing that the use of technology to simplify and speed up processes coupled with India’s entrepreneurial spirit and present geostrategic and economic advantage will see it through. Two trillion, here we come?

“(The policy) will play a critical role in facilitating India’s transition to an advanced developed economy during the Amrit Kaal period,” said industry chamber FICCI’s president Subrakant Panda. A statement by CII called the new policy “progressive and futuristic” singling out the “particular focus on e-initiatives to reduce transaction costs, merchanting trade reform, e-commerce for boosting exports, capacity building of MSMEs, streamlining licensing procedures and creating trade resilience.”

The new policy is based on some of the favourite talk points that Commerce Minister Piyush Goyal, not to forget his big boss, have been harping on about some time — ease of doing business, boosting manufacturing and productivity as well as creating export hubs.

The last is pivotal if an export inflection from nearly $800 billion all the way to $2 trillion is to happen in just seven years. The secret sauce? Open up the export stage to small businesses.

Setting up district export hubs could boost MSME competitiveness and help them think big and aim for markets abroad. The export hubs, coupled with streamlining of clearances and procedures, many of them using a technological interface would be the level playing field here.

“The thrust laid on technology interface for approvals under various schemes (will) enhance the ease of doing business,” pointed out Panda of FICCI. “The infrastructure and e-Governance initiatives charted out in this policy along with the recently launched National Logistics Policy will enable our exporters to reduce the trade and logistics costs.”

However, all the extra enthusiasm doesn’t hide the tough challenges on the road to $2 trillion. If the global scenario promises to be inflationary and slow at least for the immediate future, that could well have its domino effect on Indian exports, no matter how gung-ho Indian businesses are. With the Indian economy so intertwined with global cues, impact of anything from an oil price hike or some sudden geopolitical move by China (or anyone for that matter) could strain the business-as-usual bonhomie at Nhava Sheva (India’s biggest export point).