The upcoming Foreign Trade Policy can spell out a vision in this regard, given the growth of ‘e-shopping’
India has come a long way since the decade of the 1990s when its exports were mostly led by the services sector. Today, a strong focus on both services and manufacturing is providing strong tailwinds to Make in India for the world paradigm. This change did not happen by chance but due to relentless pursuit and participation of the industry under the vision of the Government.
India’s manufacturing sector has grown 3X in FY22 with contributions from traditional sectors like petrochemicals, steel, cement, and automobiles, as well as new sunshine areas like electronics, toys, and others. There’s also been a steady spike in other categories like bed linens, jewellery, toys, coffee, butter, honey, millets, musical instruments, and more, which is boosting overall exports.
What’s been interesting in the last few years is the growth of e-commerce exports. E-commerce is dramatically opening up the global market for Indian entrepreneurs at scale and this has changed the fate of ‘Made in India’ products.
The proof of the pudding is in the eating. A case in point is the India toy story, where exports have grown at nearly 30 per cent CAGR over the last seven years. In the same time period, export of butter and dairy spreads from India has risen at a 25 per cent CAGR. The writing on the wall is evident — India’s exports story is on the move and this could be the defining decade for merchandise exports from India.
The last couple of years have brought about a structural shift in shopping, with more and more customers across the world choosing to shop online. Having experienced the convenience of online shopping during the pandemic, customers continue to dollar vote for digital shelves. There are an estimated 2.14 billion online shoppers globally and the number continues to grow rapidly.
This presents a fantastic opportunity for businesses in India to start thinking about the global opportunity more seriously. With wider availability of internet, rising e-commerce marketplaces, manufacturing on demand, easier access to capital, and variable models for logistics and shipping, Indian entrepreneurs can plug themselves into global supply chains and create strong exports businesses.
We are already seeing the rise of the D2C revolution in India where new-age brands from different corners of India are serving customers across the country and the world. Industry estimates suggest that there are over 800 successful D2C brands in India today, with a sector valuation of over $40 billion.
These brands and thousands of others have a gold mine of underserved needs from customers across the world to cater to. The success mantra will largely depend on how well they innovate on behalf of customers and harness the power of technology to meet customers right where they are… whether in Lucknow or in London.
Technology meets trade
Having said that, a lot of ground needs to be covered for expanding the exports opportunity to millions of small businesses across the country. There are bottlenecks related to logistics, cross-border payments, compliance requirements and more. A lot of work is happening in the ecosystem with government agencies and private players working to integrate technology at every step of the exports lifecycle.
In fact, e-commerce has emerged as a strong channel for exports in the last four-five years and is helping remove most of these bottlenecks for entrepreneurs through economies of scale and by leveraging technology to take the size of business out of the equation.
The immediate priority areas we need to focus on to fuel e-commerce exports are: creating more awareness about e-commerce exports on the ground; leveraging digitisation to smoothen exports-related processes, and building effective yet low-cost logistics solutions. And this is where the upcoming Foreign Trade Policy can be an instrument of transformation. It can provide the right contours and levers that can accelerate India’s exports-led growth.
Digital India has lent a solid impetus to other government-led initiatives such as Start Up India and Aatmanirbhar Bharat; it has great potential to take India to the world.
The Government has taken steps to encourage cross-border trade such as free-trade agreements between countries such as the UAE, the UK, Australia, and others, which has led to rise in exports. We need to continue taking a series of bold steps and simplify and contextualise some current polices to lend a further push to exports.
As the world stares at a period of economic uncertainty, it won’t be wrong to say that exports through e-commerce — the perfect blend of technology and economics — could be a game-changer for India. The good news is that this thinking resonates in several directional changes that the Government has brought into effect in recent years and continues to do.
The Prime Minister had recently said, “In the world that is shrinking due to physical, technological, and financial connectivity, new possibilities are being created around the world for the expansion of our exports.”
This decade will be a key period in India’s economic growth story and can propel it to become a leader in international trade.
To achieve this, a trident combined force of the Government, MSMEs, and the industry will have to work together to unlock the huge cross-border trade potential that lies ahead of us. Furthermore, an in-depth understanding of the prevailing challenges in this relatively new segment and developing potential policy and strategy solutions for them are the need of the day, with work cut out for academics, experts, and policy analysts.
Gopalakrishnan is Fellow and Former Trade and Commerce Head, NITI Aayog, and Wakankar is Director Global Trade at Amazon India. Views are personal