Restructuring export basket on lines of Bangladesh need to boost growth
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India must restructure its export basket if it really wants to achieve high growth found in exports, the Economic Survey has said. It contributes that India’s current methodology violates the first rules of trade theory in economics. The Survey has utilized the example of India’s eastern neighbour Bangladesh to make clear what should be done.
Bangladesh’s exports grew at 8.6% in the last 10 years (2011-2019), whereas India’s export growth was a paltry 0.9%.
One of the biggest known reasons for India’s poor export functionality is that it's not exporting products where Indian manufacturers have an edge vis-a-vis the rest of the world. This is against the basic principle of modern trade theory of comparative advantage which says a country should export merchandise which it could produce cheaply and import goods which are more expensive to produce domestically. Both India and Bangladesh are believed to come to be labour abundant economies and for that reason expected to own a comparative advantage in making things which are labour intensive.
While Bangladesh’s export basket is commensurate with this economic reality - textiles, footwear and apparel constitute 90% of its exports - around 40% of India’s exports are capital or technology intensive. Employing the Bangladesh’s export example, the survey asked the country’s (exporters) to understand out of this and specialise in items where it is competitive.
Biswajit Dhar, professor of economics at Jawaharlal Nehru University, said that successive governments have treated the export-oriented labour intensive MSME’s such as for example textile industry as a good sunset sector. Regarding to him, for such sectors to increase there has to be fundamental change in government approach towards them.
“There needs to be effective dialogue between your government and the industry to handle the pain points like- infrastructure problem, labour issues and others exactly like Bangladesh did,” he added.
Source: https://www.hindustantimes.com
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