INDIAN INSTITUTE OF MANAGEMENT INDORE

INTERNATIONAL TRADE AND WTO

GROUP SUBMISSION

GROUP 5

NAME ROLL NO
Arunita Gupta 2021PGP068
Atharva Navandar 2018IPM023
Poonam Khule 2021PGP178
Roli Singhal 2021PGP297
Sabyasachi Mishra 2021PGP302
Tanvi Choudhary 2021PGP404
Question: India’s Commerce Minister has sought advisory for $1tn worth of Indian exports
by 2025
Mr. Piyush Goyal, the minister of Commerce and Industry has envisioned India’s export target
of USD $1 trillion by expanding PLI schemes and aggressively pursuing FTAs with US, Europe
and the United Kingdom. The FY22 figure for Indian merchandise and services exports was at
an all-time high of USD 669.65 Billion. The required compound annual growth rate to achieve
the target export value of $1 trillion by 2025 is 14.28%. The Confederation of Indian Industry
has identified 14 product categories which may help India clock its export target - petroleum
products, furniture, pharmaceuticals, automobiles, and textile. This project outlines the steps
that can be taken to achieve this growth.
1. Agricultural Exports
As per the food and agriculture organization, the nation has the potential to achieve
agricultural exports worth USD 100 billion. However, India's agricultural exports pay
excessive import taxes in foreign markets due to high import tariffs on dairy goods, fruits,
vegetables, and oilseeds. As an illustration, import tariffs on dairy are as high as 511
percent in the EU, 933 percent in the US, and 692 percent in Japan. Apart from this,
despite free trade agreements, countries like the United States and Japan impose indirect
barriers on the import of agricultural products like subsidization of their domestic
agricultural products.
Therefore, renegotiating tariffs and implementing free trade agreements with Japan and
other importers of Indian agricultural products will increase the value of Indian agricultural
exports and bring us closer to the USD 1 trillion target. Also, domestic price support (MSP)
by the government also discourages farmers from exporting their produce. This also boosts
the production of cereals compared to cash crops which has a larger export market.
Restricting the quantity of cereal crops given the minimum support price, possibly by
having slabs, will increase the proportion of cash crops farmed in the country.
2. Manufacturing Exports
India’s manufacturing exports for FY21–22 reached an unprecedented $418 billion, an
overall growth of more than 40% compared to the $290 billion from the previous year.

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India’s significant growth in manufacturing exports has been propelled by 6 transformative
megatrends-
i) Supply chain diversification
India stands among the top 4 countries for relocation of American companies. Moreover,
many manufacturing giants such as Vietnam, Malaysia and China have moved away from
labor-intensive assembly of network products which gives India a huge opportunity to
capture this market. As per the Economic Survey (2019-20), “assemble in India” has
potential to increase India’s export to the world by 6% and create 80 million jobs with it.
ii) Government led Initiatives
Government’s continuous effort on schemes like PLI which had an outlay of $48 billion over
five years has led to an increase in country production whereas initiatives aimed at
decreasing the restrictions on FDI have augmented capital flow which have increased by
about 65% between 2015 and 2021.
iii) Sectoral Advantage
India has maintained a distinct advantage in sectors like Pharmaceuticals, Chemicals,
Industrial machinery, and Textiles.
iv) Capex led growth
v) Mergers and Acquisitions
vi) PE/ VC led investments

However, to add to this momentum, the government should focus on expansion of export
centric PLI scheme. Manufacturers who export goods and services should be given subsidies in
the form of income tax reduction or subsidized export duties to raise exports and further
relaxations must be made in FDI related policies in all sectors except those of national
importance. Further, focus should be turned on bilateral agreements with countries in
Southeast Asia and Middle east which could benefit both economies and build significant
international relations.

3. Services Exports

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Services from India are mainly exported under four categories: Direct exports which involve
servicing clients abroad; services, primarily hospitality, provided to foreign tourists coming into
India; an Indian educational, medical, or financial organisation opening outlets abroad;
individuals travelling abroad to provide services, which is different from salaried jobs. IT and
ITES remain the top service exports from the country contributing to nearly 50% of the total
service exports. However, there are other sectors like consultancy services, Gaming, Logistics ,
Travel and Tourism which certainly require a push. Recent investments in promoting tourism
by governments of Rajasthan and Uttar Pradesh have certainly paved the way as restrictions
on movements across the globe have eased, however, other governments must also jump
aboard this bandwagon.
Suggested improvements in existing policies:
i) Solving MSMEs’ Crisis: The SEIS offers incentives to Indian service exporters of designated
services in the range of 3 to 7 percent of net foreign exchange revenues.
With the new FTP, a revision in the minimum cap for the net foreign exchange earnings
that may be claimed under the scheme and quicker GST refunds to worldwide services are
both highly necessary
Additionally, to improve the proportion of exporting MSMEs and boost MSME exports by
50% in 2022–2023, the government must encourage exporting MSMEs by increasing policy
support and assisting them in utilizing the export potential in current tariff lines.
ii) The new FTP must give exporters the ability to use technology in international trade. For
MSMEs to compete with their peers globally, this will be especially helpful.
iii) The GST export advantage is now beyond the scope of FTP, which has led to the denial of
export benefits to specific exporter classes. To close the gap between the two policies, it is
therefore urgently necessary. Furthermore, it is crucial that GST refunds are distributed
smoothly and without interruption from administrative processes.
iv) Exporters will stay competitive in a cutthroat market with the aid of an effective and broad
infrastructure network, including warehouses, ports, special economic zones (SEZs), quality
testing labs, certification centers, etc. India must make investments to modernize its export
infrastructure to keep up with China and other technologically advanced nations.

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References:

1. https://www.bain.com/insights/the-trillion-dollar-manufacturing-exports-opportunity-
for-india/
2. https://pib.gov.in/PressReleasePage.aspx?PRID=1816577
3. https://www.business-standard.com/article/economy-policy/will-meet-1-trn-export-
target-by-25-says-goyal-industry-seeks-more-help-120120300006_1.html
4. https://www.thehindubusinessline.com/opinion/whats-holding-up-indias-farm-
exports/article7916274.ece
5. https://www.drishtiias.com/daily-updates/daily-news-editorials/a-new-foreign-trade-
policy-for-india
6. https://economictimes.indiatimes.com/news/economy/finance/14-products-to-drive-
1-trillion-export-aim-defence-green-digital-new-export-areas-cii/articleshow/
89558636.cms?from=mdr
7. https://indianexpress.com/article/opinion/columns/the-growth-accelerator-india-
exports-gdp-economy-7946372/