India’s Foreign Trade Policy (FTP), due to be released on September 30, was delayed owing to some last-minute changes in plans, and FTP 2015-20 will remain in effect until the end of March 2023. Secondary sources claim that the upcoming FTP might shorten the target window to three years (usually for five years) and grant flexibility in policy amendment during its implementation.

Such changes primarily aim at: addressing growing global uncertainties and their concurrent impact on global trade (outlook of a global recession, uncertain global capital flows, and high energy prices); and delinking further the process of launching trade-related incentives schemes from the FTPs.

Last year, the government hinted it by announcing Remission of Duties and Taxes on Exported Products (RoDTEP) and Rebate of State and Central Levies and Taxes (RoSCTL) schemes, replacing the previous Merchandise Export Incentive Scheme (MEIS) under FTP 2015-20.

A most notable change in the upcoming FTP is the expected addition of a new chapter on the District as Export Hubs (DEH). If included, this will help make targeted interventions possible for existing pockets of districts across the country where the exports are concentrated. It is a sound policy decision in shaping and strengthening India’s export landscape.

However, selecting the right districts to promote them as export hubs is paramount to making this policy succeed. Understanding the current export landscape of India at State and district levels could aid in this regard as a first step.

India exported goods worth $422 billion in FY 2021-22. It is $130 billion or 44.6 per cent more than the $291.8 billion recorded in FY 2020-21. While this is a spectacular performance, even discounting the recovery from Covid-19, India merely ranks 18th amongst its global peers. This relatively smaller size of Indian export is not commensurate with its GDP, which stands as the fifth largest in the world.

An important factor that determines the economic success of India is the vibrancy of its States. India being a Federal Republic, a snapshot of exports at the State level is necessary to understand States’ contribution to national exports. Out of the 37 (29 States and 8 Union Territories), the top ten States account for 85.3 per cent of India’s overall exports.

The significant contribution comes from the top five States — Gujarat, Maharashtra, Tamil Nadu, Karnataka and Uttar Pradesh. These States alone contribute 66.8 per cent of India’s overall exports in FY 2020-21 (Table 1).

Unsurprisingly, except for Uttar Pradesh, four out of the top five largest exporters are States located in the South and West of the country that benefits from coastal access.

Significant variations

The export data show significant variations in performance at a district level. Out of the 766 districts in India, the top 10 per cent of districts contribute 85 per cent of India’s overall exports. Yet, only the top 20 districts (2.6 per cent of overall districts) export goods worth more than $5 billion, contributing 51.5 per cent of the total exports (Table 2).

Specifically, six districts in Gujarat account for half of it, followed by five districts from Maharashtra (24 per cent), and another 20 per cent is associated with Tamil Nadu, Karnataka and Uttar Pradesh.

The top exports from these districts are often commodities that are more susceptible to price volatility and shocks. Most surprisingly, 82 districts do not engage in any exports at all.

India’s economic dynamism depends on its States’ and districts’ robustness, particularly export strength. However, only a limited numbers of States and districts currently possess the economic vibrancy and contribute significantly towards its exports. Also, the majority of exports concentrate on non-manufactured goods.

Hence, these variations and types of exports have to be kept in mind before launching potentially targeted schemes such as DEH. The shortlisting process will aid not only in better targeting but also in the possible success of such new initiatives.

Kumar is PhD scholar, IIFT, and Ikeda is Assistant Professor, IIT Delhi

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