Niti Aayog's Export Report Focuses on States, Misses National Factors
The Niti Aayog recently released its Export Preparedness Index 2024. This detailed report examines how ready India's states are to boost exports. It classifies states as 'large' and others, using four pillars with thirteen sub-pillars and seventy parameters. Clearly, a significant amount of work went into creating this index.
However, the report's intense focus on state and district-level preparedness misses the larger macroeconomic picture. Export success depends heavily on factors beyond any state's control.
Why State-Level Drive Alone Cannot Guarantee Export Success
The idea that individual states or districts can dramatically increase exports through sheer initiative is questionable. Several critical elements are determined at the national level.
First, international trade barriers play a massive role. For instance, the United States imposed a 50% import duty on certain non-services, non-pharma goods from India. This action directly hit India's garment exports, regardless of how prepared garment-producing states were. State governments cannot influence such external tariffs.
Second, the exchange rate is a crucial variable. The value of the rupee against other currencies significantly impacts how competitive Indian goods are abroad. This is managed by the Reserve Bank of India's monetary policy, not state administrations.
Third, access to foreign markets hinges on national trade deals. Free trade agreements and international partnerships are negotiated by the central government. A state's preparedness does not guarantee entry into these markets or integration into global supply chains, which is a function of national industrial policy.
National Policies That Directly Impact Export Viability
The cost of capital, influenced by the central bank's interest rates, affects every exporter. Similarly, import duties on raw materials are set by the Centre. High duties can make specific industries uncompetitive globally.
Take India's garment industry as an example. Most clothing bought worldwide uses synthetic fabrics or blends. High Indian import duties on synthetic yarn and fibre have constrained this sector's growth, a problem no single state can solve.
Non-tariff barriers, like strict quality standards from importing countries, also shape costs. While states might lobby for change, these are ultimately central government matters.
Inter-State Dependencies and Overlooked Export Forms
The report's state-centric view also fails to account for inter-state dependencies. An exporting town's success can be hampered if the nearest port is in another state with poor road connectivity, slowing shipments to docks.
Furthermore, the index parameters overlook significant export forms. Some states specialize in exporting skilled labour, which generates substantial remittance income for the entire nation. While the report acknowledges service exports and tourism, its indices do not fully capture their importance.
The Report's Value and the Need for a Future-Oriented Approach
This does not mean the Niti Aayog report is without merit. It usefully highlights where states lag behind their peers in areas affecting broader economic efficiency. State administrations should examine these gaps and work to close them.
However, achieving merchandise export success requires much more. For the coming age of artificial intelligence, we may need an entirely new approach. AI combined with advanced robotics could transform labour-intensive sectors into capital-intensive ones while opening new opportunities.
Studying these future trends would be more beneficial than a report that overemphasizes state-level preparedness while missing the national and global factors that truly determine export outcomes.
