Export Preparedness Index

Context

NITI Aayog released the report on Export Preparedness Index prepared in partnership with the Institute for Competitiveness.

Background

Gujarat has topped in the Export Preparedness Index 2020 followed by Maharashtra and Tamil Nadu in the second and third place respectively. The six coastal states, Gujarat, Maharashtra, Tamil Nadu, Odisha, Karnataka and Kerala, feature in the top ten rankings which indicates the presence of strong enabling and facilitating factors to promote exports. Among the landlocked states, Rajasthan has performed the best, followed by Telangana and Haryana. Amongst the Himalayan states, Uttarakhand topped in the report, followed by Tripura and Himachal Pradesh. Among the Union Territories, Delhi has performed the best, followed by Goa and Chandigarh. Report mentioned that Chhattisgarh and Jharkhand are two landlocked states that had initiated several measures to promote exports.

Significance of the Index

At present, 70 per cent of India’s export has been dominated by five states that are Maharashtra, Gujarat, Karnataka, Tamil Nadu and Telangana, highlighted by the government’s report. In line with this new orientation, NITI Aayog has taken a significant step by developing the first-ever Export Preparedness Index for Indian states. The Index ranks states and union territories on critical parameters required for promoting the country’s exports. The Export Preparedness Index would be useful to the States and Union Territories to benchmark their performance against their peers and analyse the potential challenges and prospects to develop better policy mechanisms to foster export-led growth.

Keeping concentration on the concept of Aatmanirbhar Bharat, India is looking towards a present-day dynamic economic landscape. Attaining self-reliance implies becoming globally competitive by removing bottlenecks at various steps in the export process as the country’s export sector holds immense potential to become a viable alternative supplier for some of the major economies. To realize this potential, it is crucial that India turns to its States and Union Territories and makes them active participants in the country’s export efforts, which would be achieved by creating an enabling framework, establishing the required institutions, removing bottlenecks, and incentivizing exports.

Export Preparedness Index (EPI) 2020

EPI intends to identify challenges and opportunities, enhance the effectiveness of government policies and encourage a facilitative regulatory framework.

The structure of the EPI includes four pillars which are Policy, Business Ecosystem, Export Ecosystem and Export Performance.

It also includes 11 sub-pillars like Export Promotion Policy, Institutional Framework, Business Environment, Infrastructure and Transport Connectivity.

The 4 pillars and the rationale behind selection of each of them are given below:

• Policy: A comprehensive trade policy provides a strategic direction for exports and imports.
• Business Ecosystem: An efficient business ecosystem can help states attract investments and create an enabling infrastructure for individuals to initiate start-ups. \
• Export Ecosystem: This pillar aims to assess the business environment, which is specific to exports.
• Export Performance: This is the only output-based pillar and examines the reach of export footprints of States and Union Territories.

Regional Disparity

Regional disparities in export infrastructure, poor trade support and growth orientation as well as the obsolete research and development infrastructure are the key barriers in boosting India’s exports. While the index tries to counter the one-size-fits-all approach by scrutinizing the performance of each state against various criteria, the learning have shown that “most” of these states have failed to address these three main issues.

The inability of most states to come up with relevant strategies for these three domains raises the question if the states do not have the capacity to address these issues. This has to be explored outside the context of this study as it requires a much-detailed analysis, highlighted in the report.

Key Solutions

The report has offered some short-term solutions to these significant bottlenecks, ranging from facilitating joint development of export infrastructure to collaborating with academic institutions. It lay attention on the creating convergence for building export infrastructure, facilitating robust industry-academia-government linkages to build trade-support networks, promoting state-level engagements for economic diplomacy, and an emphasized focus on designs and standards. It says that by adopting these reforms, India would become the largest supplier in global markets also can fulfill dream to become 5 trillion economy.

Conclusion

India's laziness and delayed action caused the loss of huge gain during the period of 2014-16, when China’s export capacity was falling and the benefit went in the hand of Vietnam and Bangladesh. This vital period had served as an opening for other developing economies to enter and subsume lines of production from where China had either been weakened or its influence became down.

India did bring in reforms in late 2017 to ensure that the export sector remained competitive and attracts potential investors. However, Bangladesh and Vietnam had made the most of the situation before India and enhanced their export competitiveness by targeting their strengths.

Hence India's States will not only have to focus on increasing and diversifying exports but also need to focus on ensuring forward and backward integration to global value chains, which would allow the states to export higher value-added goods and services.

Connecting the Article

Question for Prelims

In relation to the Export Preparedness Index (EPI) 2020, consider the following statements:

1. It is the first such report to examine export preparedness and performance of Indian States.
2. It weighed all the States and Union Territories on 50 different parameters.

Which of the following statements is/ are correct?

(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2

Question for Mains

What are the key problems of India's export sector ? Suggest necessary reforms to boost it.