Call for an ‘Assemble in India for the World’ initiative: Economic Survey

To boost exports, India must focus on a set of industries, referred to as ‘network products’, where production processes are fragmented but controlled by leading MNCs within their “producer driven” global networks.

The Economic Survey has suggested integrating ‘Assemble in India for the World’ plan into the Make in India programme so that the country can raise its export market share to about 3.5 per cent by 2025 and 6 per cent by 2030.

“In the process, India would create about four crore well-paid jobs by 2025 and about eight crore by 2030,” the Survey said.

It further said the incremental value added in the economy from the target level of exports of network products, which is expected to reach $248 billion in 2025, would make up about one-quarter of the increase required for making India a $5-trillion economy by 2025.

Competing with China

The Survey noted that China’s remarkable export performance vis-à-vis India is driven primarily by specialisation on a large scale in labour–intensive activities, especially network products, where the production occurs across global value chains operated by MNCs.

Examples of network products include computers, electronic and electrical equipment, and telecom gear.

It pointed out that China enjoys a much greater share of the global export market than India primarily due to its focus on specialisation. But the Survey said that India is clearly catching up with China in terms of diversification across products and markets.

Spreading exports thinly

High diversification combined with low specialisation implies that India is spreading its exports thin over many products and partners, leading to a lacklustre performance compared to China, it added.

According to the Survey, the specialisation effect can change over the years with shifts in the quantity and/or prices of exported commodities. “Therefore, if India wants to become a major exporter, it should specialise more in the areas of its comparative advantage and achieve significant quantity expansion,” the Survey suggested.

It noted that the overall impact of FTAs on India’s exports to the partners with which it has signed free trade agreements is 13.4 per cent for manufactured products and 10.9 per cent for total merchandise. The overall impact on imports is lower at 12.7 per cent for manufactured products and 8.6 per cent for total merchandise. Therefore, the Survey said, from the perspective of trade balance, India has clearly “gained” in terms of a 0.7 per cent increase in trade surplus per year for manufactured products and of 2.3 per cent increase in trade surplus per year for total merchandise.

India’s exports, however, contracted for the fifth month in a row by 1.8 per cent in December 2019 to $27.36 billion. During April-December, exports slipped 1.96 per cent to $239.29 billion and imports declined by 8.9 per cent to $357.39 billion, leaving a trade deficit of $118.10 billion.

Ease of doing business

The Survey noted that policies that foster ease of doing business and flexible labour regulation foster entrepreneurial activity, especially in the manufacturing sector. As the manufacturing sector has the potential to create the most jobs, States must focus on enabling ease of doing business and push for flexible labour regulation.

It further said that ease of doing business has increased substantially in the last five years due to reforms that provided greater economic freedom. “Yet, the pace of reforms in enabling ease of doing business needs to be enhanced so that India can be ranked within the top 50 economies on this metric,” it added.

COMMENT NOW