Export ambitions: States can play only a limited role in the push

The Union government aims to give states and districts a larger role in export promotion. Under the plan, as reported by this newspaper last week, states will prepare district-level export-action plans, identify products with export potential, and strengthen industrial clusters. And they will be assessed through periodic scorecards on implementation. The objective is understandable. Export competitiveness is built in industrial clusters and production hubs, and local governments are often better placed to identify physical bottlenecks that prevent firms from reaching overseas markets. But the Centre should not conflate decentralising implementation with decentralising responsibility for exports.

 

The World Trade Organization’s (WTO’s) latest Trade Policy Review rightly noted that India must address structural constraints such as high trade costs, regulatory complexities, and infrastructure gaps if it hopes to achieve its ambition of becoming a developed economy. India aims to raise its share of global merchandise exports from just 1.8 per cent in 2024 to around 10 per cent by 2047. This will not happen automatically and states undoubtedly have an important role. They can strengthen industrial clusters, improve logistics, ensure reliable power, facilitate land acquisition, and establish testing laboratories and certification facilities. States are also better placed to identify why firms fail to export, whether because a road to the nearest freight terminal is inadequate, certification takes too long, or a common testing facility is absent. These are constraints that may not be diagnosed from afar.

 

However, the factors that ultimately determine export performance remain overwhelmingly under the Union government. No state government can negotiate market access, conclude a free-trade agreement (FTA), respond to non-tariff barriers, reduce import duties on critical inputs, or negotiate mutual recognition agreements for standards. Modern manufacturing exports also depend on value chains and imported intermediates such as semiconductors, specialty chemicals, machinery and critical minerals. If these remain expensive or difficult to source, states can do little to improve export competitiveness. The WTO itself notes that Indian manufacturing continues to face high input costs, partly linked to tariffs. It is widely recognised that India’s tariff structure is a constraint for exports. India needs to actively address this aspect. It has done well to conclude FTAs, including with the United Kingdom and the European Union. However, India’s past record in utilising FTAs shows that it needs to do more, partly in terms of capacity building. Investment treaties, which are again the domain of the Centre, will need to be streamlined. Foreign investment is often a big driver of trade and competitiveness.

 

Thus, while the Centre is right to move the focus of export policy away from subsidies towards competitiveness, it should avoid shifting accountability without shifting the instruments needed to deliver results. Export competitiveness may well begin in districts and industrial clusters, but export success is ultimately secured through national trade policy. States and districts should be expected to do only what they can do best: Create the conditions in which globally competitive firms can flourish.