Restructuring export basket on lines of Bangladesh must to boost growth

Bangladesh’s exports grew at 8.6% in the last decade (2011-2019), whereas India’s export growth was a paltry 0.9%.

India needs to restructure its export basket if it wants to achieve high growth in exports, the Economic Survey has said. It adds that India’s current approach violates the first principles of trade theory in economics. The Survey has used the example of India’s eastern neighbour Bangladesh to explain what needs to be done.

A woman works in a garment factory in Dhaka, Bangladesh (Reuters)

Bangladesh’s exports grew at 8.6% in the last decade (2011-2019), whereas India’s export growth was a paltry 0.9%.

One of the biggest reasons for India’s poor export performance is that it is not exporting goods 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 that a country should export goods which it can produce cheaply and import goods which are more expensive to produce domestically. Both India and Bangladesh are considered to be labour abundant economies and therefore expected to have a comparative advantage in producing goods which are labour intensive.

While Bangladesh’s export basket is in keeping with this economic reality — textiles, footwear and apparel constitute 90% of its exports — around 40% of India’s exports are capital or technology intensive. Using the Bangladesh’s export example, the survey asked the country’s (exporters) to learn from this and specialise in products in which it is competitive.

“There has to be effective dialogue between the government and the industry to address the pain points like- infrastructure problem, labour issues and others just like Bangladesh has done,” he added.