By Pushkar Mukewar
Trade, import and exports for MSMEs: With the intent to fructify an ambitious export target for FY23, The Directorate General of Foreign Trade (DGFT) has sought Rs 6,000 crores in funding for the ‘Districts as Export Hubs’ initiative. All eyes are already on India as it ups its ante to produce and export more in the wake of global supply chain disruption. Moreover, labor shortage, lack of raw materials, etc. due to covid-19 impact have severely dented China’s potential to continue its global exports momentum, with many countries opting for the China +1 strategy being the icing on the cake for India. With all these factors at play, industry experts view the proposal as a step in the right direction, and the timing couldn’t have been more appropriate.
In the project’s first phase, work will begin on the 200 out of the 700-odd districts in India. The aim is to boost production in the remotest of towns and connect businesses to foreign buyers. This will be a shot in the arm for India’s medium, small and micro enterprises (MSMEs), who are the backbone of the country’s economy.
Tapping the Untapped Potential
Among the most robust calls to action in making districts as export hubs, were made by Prime Minister Narendra Modi in his 2019 Independence Day speech. He lauded that each district’s potential equals that of an entire country, given its diverse identity and potential for the global market.
The top six states in India- Maharashtra, Gujarat, Karnataka, Tamil Nadu, Telangana, and Harayana contribute 75 per cent of India’s overall exports. This shows how exports are concentrated in only certain regions of the nation.
Besides this, perhaps even more focus on promoting region-specific identified products to reach potential buyers outside India is an untapped area with incredible growth potential. For instance, consolidating the exports of gems and jewellery, garments, furniture, toys, and blue pottery from Jaipur, Rajasthan. And also, doing the same in Palghar (Maharashtra) for products related to chemicals, pharmaceuticals, engineering, plastics related, fisheries, and marine food processing may multiply the exportability of the whole country instead of focusing exports mainly from large export hubs.
Making Aatmanirbhar Bharat a Reality
If the district export hub scheme gets the Finance Ministry’s approval, it will form a part of the new Foreign Trade Policy, set to be announced in September.
Self-sufficiency and self-reliance will be the first by-products of this move. Specific actions to support local exporters and manufacturers may be a boon in addressing challenges obstructing improved supply chains, market accessibility, and handholding for increasing exports. Among the four potential wins or benefits will include:-
- Heavy investments in the district will boost manufacturing and exports and provide the ecosystem for innovation and use of technology at the district level to make exports competitive.
- Reduction of transaction costs for the MSMEs at various stages of the export cycle and generating employment in the district.
- Providing platforms for the district’s broad and global reach of products and services through e-commerce and digital marketing.
- Diversification of exports which is important to improve the stability of export earnings.
Working towards a Flourishing Rural Economy
The focus on far-fledged areas of the country would fuel economic activity in the rural hinterland/small towns and prepare businesses for export, not to mention aid in employment generation at the grass-root level. Besides supporting MSMEs and local artisans, logistics and agricultural sectors will also see development, a critical factor that would help India meet global expectations of delivery and quality. Additionally, Niti Aayog believes improving the export competitiveness of states could further increase their wealth and standard of living, which in turn is expected to minimize the regional disparity across states.
According to Niti Aayog’s Export Preparedness Index 2021 Report, India hasn’t completely leveraged the Lewis curve for low-skill manufacturing vis-a-vis more skill-intensive exports. Moreover, the report said India lags in tapping existing market potential compared to Vietnam, Bangladesh, and China, which continue to lead exports in this category. Since the nation has a comparative advantage in low-skilled exports, it must boost its manufacturing capacity to exploit this opportunity further. The focus on district hubs for export will likely address this gap.
With foreign trade constituting 45 per cent of India’s GDP and 2021-22 being a bumper year for India’s exports, marking a record-high of $419 billion, heightened emphasis on economy-building via districts as export hubs will prove pivotal in organizing the unorganized MSME sector. Moreover, an Aatmanirbhar Bharat focused on growing all that has been ignored for decades will set the ball rolling for India to supersede global peers in exports and have a decades-long impact.
Pushkar Mukewar is CEO & Co-Founder of Drip Capital. Views expressed are the author’s own.