By Afaq Hussain
Import, Export, Trade for MSMEs: The World Trade Organization (WTO) has moderated the growth forecast of world trade in the year 2023 due to several disruptions impacting countries globally. The projection finds its endorsement in the recently released data by the Department of Commerce (MoCI) in India, wherein merchandise exports contracted by 8.8 per cent to $33.88 billion in February. While the global economies were moving out of the COVID-19 induced disruption, the Ukraine-Russia war led to the rise of new challenges for the economies world over. These disruptions have led to the realignment of supply and production centers, resulting in the diversification of global value chains, which have created opportunities for new destinations to emerge as manufacturing hubs.
These disruptions have also offered some crucial learnings towards developing a resilient and digitised trade ecosystem. Hence, it is important to work on trade facilitation measures towards an efficient trade environment which would help in reducing trade costs and better participation in the global value chains.
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The focus on trade facilitation in India has been a priority for quite some time, with regular interventions being implemented on ground. These measures have been validated through the latest UN Global Survey on Digital and Sustainable Trade Facilitation where India’s score moved up from 78.49 per cent in 2019 to 90.32 per cent in 2021. In the last few years, different reforms, infrastructure upgradations, digitalisation and automation measures have been at the core of transformation of India’s trade ecosystem. Government interventions have focused on creating the right facilities to bolster key reform measures including implementation of Direct Port Entry and Direct Port Delivery, initiation of Faceless Assessment, introduction of RFID container tracking system, and creation of a Port Community System (PCS); all of which aimed at seamlessly integrating all maritime trade-related stakeholders on a single platform.
To keep up with the volatile trading environment and practices, it is imperative to ensure focused and coordinated efforts towards an actionable plan to overcome the challenges that still exist, and learn from other domestic as well as international best practices, which could potentially result in increased efficiencies in near future.
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The way forward
There is an opportunity for India to play a larger role in a more resilient and diversified manufacturing and supply ecosystem. With the country’s consumer market projected to grow by 300 per cent from $1.5 trillion in 2019 to about $6.0 trillion by 2030, India has substantial potential in the domestic markets, which promises to propel India towards becoming a manufacturing hub in the near future. Additionally, the government’s focus on enhancing the manufacturing sector, a young and potent workforce, as well as a large MSME sector, will also be important towards strengthening India’s position in the global value chains.
The recent trade agreements with the United Arab Emirates and with Australia are steps in this direction. Although regulatory authorities have taken initiatives for faster and anonymous clearance, standardizing these initiatives across ports is necessary. Further, promoting paperless trade and enhancement of border process automation for example, real-time digital message exchange of testing agencies referred as partner government agencies (PGAs) with other digital platforms in the trade ecosystem to automate certifications, complete integration of Port Community System (PCS) with other stakeholders could also have positive impacts. Undertaking capacity building of the trade community, including exporters, importers, agents, transporters, etc., and increasing awareness of digitization measures initiated by regulatory departments can boost the usage of new digital platforms for well-coordinated, faster, and cost-effective trade practices.
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Measures to enhance trade-related physical infrastructure for smooth transportation of goods and rationalize modal shares in cargo movement can reduce logistics costs, which are currently higher compared to other economies. Ensuring good connectivity/approach roads and parking zones at all ports to reduce waiting times, first and last mile connectivity to enhance the usage of rail and inland waterways and rationalise modal mix, mechanization of operations at land ports to streamline cross border trade with the immediate neighbourhood, implementation of multi-modal transport, completion of infrastructure projects including dedicated freight corridors, etc. would have a direct impact on logistics outlay and consequently, the overall cost to the trade. In addition, prioritising coordination and regular interaction between government agencies and the private sector at each port through existing structures like National Committee for Trade Facilitation (NCTF) and port level committees can help identify and resolve port-level issues.
With an eye on achieving the target of $5 trillion economy, India is on a strong growth path and is well poised to achieve significant traction in both the manufacturing and services sectors. Against this backdrop, key trade facilitation measures, some of which have been highlighted above, would benefit multiple stakeholders in the trade ecosystem including exporters, importers, transporters, etc., and also help the government in achieving the envisaged targets of economic growth.
Afaq Hussain is Co-Founder and Director at Bureau of Research on Industry and Economic Fundamentals (BRIEF), New Delhi. Views expressed are the author’s own.