India has set itself an underwhelming trade target for the next five years, with hopes of matching its performance in the previous five riding on a global recovery.
The country has doubled its merchandise exports in the five years since 2004, and is content with redoubling them by 2014. Starting from an incredibly low base, we are targeting growth rates in the region of 20 per cent, while China is cruising a neat 10 percentage points higher. The comparison with our northern neighbour, if somewhat irrelevant, is inescapable: since China joined the World Trade Organisation in 2000, it has more than quadrupled its exports to corner 10 per cent of world trade. India at 17 per cent is the odd man out in an emerging Asia that sells half its wares abroad.
Much of the Asian story is about the competitiveness of local manufacturing. With a hand from governments that have kept transaction costs down, developed facilitating infrastructure, waived taxes, and deliberately devalued their currencies. Apart from the last, the Indian State has a lot of catching up to do. The trade policy unveiled on Thursday critically exposes the government’s inability to push exports through fiscal giveaways. The little relief on offer is directed at the labour-intensive sectors where little can be done till demand revives. Again, our exporters cannot be weaned off the Western consumer who left his credit card at home by targeting Africa and Latin America where the wallets are not thick enough.
Asia itself is a big opportunity — half of what it exports remains within the continent — and bilateral trade agreements loaded in our favour ought to form the core of our Look East policy. India has, however, demonstrated in the treaties it has signed with Asean and South Korea it is prepared to yield on merchandise trade to gain deeper access for its services, where it has the competitive advantage. The policy environment thus makes even our modest trade gains appear fortuitous. Having lost the race when the going was good, India needed to grab a bigger share of a market shrinking in a global recession. This was a good opportunity to think how our exporters can give their customers more bang for their buck. The 10 months of consecutive export declines suggest we missed the bus, again.