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India should aim to promote apparel export on mission mode, says Suman Bery, Vice Chairman, NITI Ayog

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August 02, 2022 “India should focus on promoting apparel export on mission mode. There is no reason why India should lose out on export opportunity in this sector to neighbouring countries as our country has been a global hub for textile manufacturing since time immemorial. It is time we leverage our policy initiatives such as mega textile parks to aim for increased exports not only in yarn and fabrics, but also in apparel and clothing,” said Mr. Suman Bery, Vice Chairman, NITI AAYOG at an event to launch MVIRDC WTC Mumbai Research Study on ‘India’s Export Competitiveness’.

The study highlighted that India’s share in world export of high value added items such as apparel & clothing has remained stagnant around 2.3% since 1990, even as our share in low value added items such as yarn, fabrics, made-up articles improved from 2% to 6% between 1990 and 2018.

Mr. Bery welcomed the idea of encouraging foreign trade settlement in local currency and suggested that RBI and banks may resolve practical difficulties such as free convertibility of local currencies, availability of hedging and trade finance in local currencies, development of alternative payment infrastructure etc.

Mr. Bery suggested WTC Mumbai and other export promotion organisations to handhold MSMEs in integrating in global value chain in the new world order where they have to comply with strict sustainability standards involving environment, labour and product traceability norms. These sustainability standards are important issues in our negotiation of trade agreement with large partners such as European Union, Mr. Bery pointed out.

Mr. Bery suggested that India should consider imports as an essential strategy to boost export competitiveness, instead of worrying about its consequence on trade deficit. He said, “For a relatively open economy like India, competitiveness is linked to imports. In certain value chain such as precision engineering, India is dependent on imports. It is tempting to impose tariff on imports to reduce trade deficit. However, a tax on import is a tax on exports and hence there is a need to reconsider import tariff to support our MSME exporters. India, which has a surplus on services account and remittances in the balance of payment, has had a reasonably manageable trade deficit in the past, except in the current circumstance when energy prices are abnormally high. There is little reason to consider a significant trade deficit to GDP ratio as worthy of policy attention.”

India’s trade deficit doubled to USD 70.8 billion in April-June 2022 compared to USD 31.4 billion in the comparable quarter of last year because of increase in import bill of crude oil, coal, edible oil and precious metals.

Mr. Bery explained that we should not be too rigid in our distinction between merchandise exports and services exports as a lot of service component is embodied in merchandise exports as well. He said, “Various digital initiatives that facilitate exports represent embodiment of services in goods exports. Trade facilitation by itself is services intensive. So, it is not appropriate to draw sharp distinction between goods and services exports in supply chain. We need to identify the services provided by MSMEs that are embodied in goods exports.”

Mr. Bery informed that there have been policy focus on exports and Government of India has taken several initiatives in the recent past, which have started bearing fruit. He said, “The agenda of the central government is defined by a High Level Advisory Committee Report in 2017, which not only discussed trade but also logistics and taxation which influence exports.”

Earlier in his welcome remarks, Dr. Vijay Kalantri, Chairman, MVIRDC World Trade Center Mumbai suggested that the central government may set up a task force under NITI AAYOG to revive local MSME units that became sick due to unfair competition from imports, especially in printed circuit boards, white goods and electronic components.

Dr. Kalantri remarked, “This is the right time to revive our MSMEs under the Aatmanirbhar program by rethinking on import substitution. India should also reduce cost of logistics, which stands around 8% of GDP to less than 6% so that we can compete in the international market”

Dr. Kalantri also suggested the need to promote local currency settlement for trade within SAARC, BIMSTEC and Asia-Pacific region to reduce transaction cost, price competitiveness and grow overall trade volume within these blocs.

The MVIRDC Research Study on 'India's Export Competitiveness' is an outcome of an extensive primary survey and meticulous analysis of foreign trade data from authentic sources such as UNCTAD, ITC, Geneva and India's Ministry of Commerce. The study made more than 8 policy recommendations for boosting exports based on primary survey with representatives of gems & jewellery, leather, ceramics and special economic zones (SEZs) in India. The study identified 100 champion products for exports, highlighted export potential in North Eastern states and examined trends services exports.

During the event, Mr. Suman Bery also launched WTC Mumbai’s Connect India Trade Show 2022, which aims to facilitate global market access for more than 50,000 MSMEs through a digital platform during August 1, 2022 to November 30, 2022.

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