New Delhi: India should more than double its share in the world merchandise exports to at least 4 percent in the next five years, a government document said Wednesday.
In 2013, India's exports share in the world merchandise exports was 1.7 percent, said the Economic Survey 2013-14 tabled in Parliament.
"India should aim to increase its share in world merchandise exports from 1.7 percent in 2013 to a respectable ballpark figure of at least 4 percent in the next five years," it said, adding: "India's exports should grow consistently by around 30 percent annually to reach" that figure.
It said the aim is "not impossible" as during 2003-04 to 2007-08, India's exports grew consistently by above 20 percent annually.
However, it said that achieving this aim in the medium term is a big challenge and some basic steps need to be taken like product diversification, building export infrastructure, focusing on useful free trade agreements, addressing the inverted duty structure, rationalising export promotion schemes, and taking steps for trade facilitation.
India's merchandise exports share in world exports increased from 0.5 percent in 1990 to only 1.7 percent in 2013 whereas China's share increased from 1.8 percent to 11.8 percent during the same period.
"Thus there is a yawning gap between India and China in the share of world merchandise exports," it added.
The country's exports grew by a double-digit pace for the first time in seven months in May, narrowing the trade deficit.
"In 2014-15 first quarter, trade deficit declined by another 42.4 percent," it said.
It said the pick up in India's exports in April-May 2014 though a positive sign, is partly due to the low base.
According to the IMF's World Economic Outlook projection, world trade volume would grow to 4.3 percent in 2014 and 5.3 percent in 2015 from the 3.0 percent in 2013 with a marked improvement in export and import growth of advanced countries.
However, it said there is also the downside risk of external shocks like the latest increase in oil prices owing to the Iraq crisis.
Talking about the services sector growth, it said services growth to a large extent depends on global growth and trade.
The prospects for IT services, however, seem bright with Gartner projecting a 3.1 percent increase in IT spending worldwide in 2014.
The robust growth in foreign tourist arrivals of 10.6 percent coupled with the 11.4 percent growth in foreign exchange earnings in the first two months of 2014-15 also augurs well for the Indian tourist sector.
"Thus the signals in India's service exports are mixed," it added.
The survey said exports infrastructure, particularly ports-related infrastructure, which affects trade, needs immediate attention.
The best of India's ports do not have state-of-the-art technology as in Singapore and Shanghai.
Poor road conditions at ports, congestions, poor cargo handling techniques are resulting in high transaction costs, and thus loss of market competitiveness, it said.
"Export infrastructure should be built on a war footing. Just as drastic changes have been brought about in India's airports and metro rail, sea ports should be the immediate priority," it said.
On product diversification, it said while there has been market diversification changes in India's export basket, not much of demand-based product diversification has taken place.
It said special attention needs to be given to the electronics hardware sector which virtually collapsed with the signing of the Information Technology Agreement by India.
"Till now our focus was on exporting what we can (or supply based), now we have to shift to items for which there is world demand and we also have basic competence," it added.
Further, it said there is overlapping of export promotion schemes with many focus markets and focus products getting added each year in the foreign trade policy.
"There is need to rationalise the export promotion schemes to a bare minimum which can also reduce transaction costs and trade litigations. Also many rates of concession should not be there," it said.
Even for duty drawback schemes, it said there should be limited rates instead of having different rates even for similar items.
"This will make things simpler and avoid discretionary decisions. Wherever tariffs are low or can be reduced, export incentives should be withdrawn as the transaction costs would be higher than the benefits owing to duty concessions," it added.
Another major challenge is facilitation of trade by removing delays, reducing high transactions costs on account of procedural and documentation factors, besides infrastructure bottlenecks.
According to the World Bank and International Finance Corporation publication Doing Business 2014, India ranks 134 in ease of doing business with Singapore at first place and China at 96.
It also emphasised on the need for a stable agri export policy. "Similarly external shortages/ excesses affect the domestic sector. So a smooth intertwining of domestic and external-sector policies particularly for agriculture is needed.
"Advanced economic and market intelligence to avoid major mismatches is also necessary. These issues, if addressed, could lead to exponential gains for India's exports," it said.
