. Just a few decades back, artisans made shoes and shirts using locally available inputs. Now, large global firms control the trade. Production is shared across a group of countries. Each specialises in making a part and not the complete product. This applies not only to high-end electronics and engineering products but also to simple products like shirts, chocolates and bicycles.
Here are five measures that can be taken to boost India’s export of high end products:
- lower import duties on inputs. High duty on inputs results in expensive finished product that is out-priced by imported goods both in the domestic and export markets. Low duties make domestic firms competitive. Soon many will start shipping directly. Gradually, with better forward and backward linkages, jobs increase as both exporting and importing sectors grow. In Vietnam, five million workers work with direct exporters while seven million work for firms supplying products to exporters.
- Increase access to formal finance. Enable top one million small manufacturing firms to get bank finance without collateral at regular interest rates. Less than 4 per cent of small firms in India have access to formal finance. The figure for the the US, China, Vietnam and Sri Lanka is 21 per cent.
- Simplify process of exporting for small value consignments. Many people buy local sarees, suits, handicraft, ready-to-eat/cooked products and ask the shops to courier to friends and relatives abroad. For such small value exports, we need to simplify and integrate compliances relating to Customs, GST, DGFT and other concerned agencies. Schemes like making districts as export hubs would benefit from such simplification. The simplification will also help exports by small artisans and firms located in class B and C cities.
- Invite large anchor firms in critical products to set up operations in India. This is a tested strategy for promoting the manufacturing and export of Basket A items. Government initiatives like simplified labour laws, PLI incentives, low corporate tax on new manufacturing operations and scrapping of retrospective tax have enthused many firms searching for China plus-one location to shift base to India. India’s large number of competitive ancillary units and skill base are a big plus over competing countries.
- Ensure fast entry/exit of containers through the port/customs. Since inputs criss-cross across countries several times as parts and sub-assemblies before the final product is ready, low duties and quick port exit are preconditions for participation in global value chains (GVCs). Any delay at one point disrupts the entire value chain.
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