Connecting exporters

New e-platform will reduce information asymmetry

As part of the 100-day action plan of the third Narendra Modi government, efforts are being put in place to boost India’s export potential. In this regard, the Department of Commerce has reiterated its plan to launch the Trade Connect e-platform, which must be welcomed. The idea is that the platform will facilitate aspiring exporters through guidance and hand-holding in all aspects of external trade, including certification courses on how to start exporting, providing information on products in demand, markets where the products are in demand, buyer events relevant to them, and paperwork required to register as an exporter. Apart from market information, the platform will have details regarding regulatory matters, export benefits available, tariffs in different countries with which India has signed free-trade agreements (FTAs), and other trade-related issues. Furthermore, there will be facilities to address trade-related queries, receive expert advice on trade barriers and trade disputes in export markets, access shipping and logistics services, and get service from Export Credit Guarantee Corporation of India (ECGC) and EXIM Bank.

Given increasing geopolitical tensions and supply-chain constraints, the outlook for global trade remains uncertain. India’s exports have also witnessed a slowdown. India’s services exports increased from $325.3 billion in 2022-23 to $341.1 billion in 2023-24, while merchandise exports marginally declined from $451.1 billion to $437.1 billion. Overall, India’s combined value of exported goods and services registered a marginal increase from $776 billion in 2022-23 to around $778 billion in 2023-24. India runs a large merchandise trade deficit — about $240 billion in 2023-24 — mainly because of its dependence on energy imports. The surplus in services exports and capital inflows helps finance the merchandise trade deficit. Although the external accounts do not pose any macroeconomic threat at the moment and the current account deficit is moderate, India needs to improve its performance on merchandise exports. This will not only impart greater stability to the external accounts but also create much-needed jobs for India’s rising workforce. Higher exports can help push up aggregate demand and put the Indian economy on a higher sustainable growth path. India’s share in global exports compared to its size is also significantly low.

In recent years, the government focused on domestic subsidies and import substitution to reduce the trade deficit. Meanwhile, India also has signed several FTAs. This is where the e-platform should help Indian exporters in accessing markets. For micro, small, and medium enterprises (MSMEs), in particular, or exporters with little trade information and exposure, the platform can help reduce information asymmetry. However, this should only be treated as one of the enabling factors for Indian exporters. It will also be crucial for the e-platform to operate as intended over a sustained period, as it will require substantial capacity at the backend. In any case, India has a long way to go in terms of increasing its position in global trade, which will require a broader review of the trade policy. As things stand, many large global corporations are looking to diversify away from China. India should aim to bring as many multinational corporations. This will help boost investment, exports, and economic growth in the medium to long run.