India should focus on increasing per capita exports

India Business & Trade: Global merchandise trade is expected to increase by 2.6% in 2024 and 3.3% in 2025 after dropping by 1.2% in 2023, That is according to the WTO’s latest global trade update. How do you view India’s export performance in this broad context and the future outlook?

Sudhakar Kasture: My key observation in this regard is that 10 commodities accounted for over 50% of India’s exports in 2019-20. This list is unchanged in 2022-23. So out of total 97 chapters of customs tariffs, (we will exclude 98 as it’s India specific), only 10 chapters cover 50% of our exports. The share of the remaining is less than 50%.

The same is true when you look at countries. For example, in 2019-20, US, UAE, China, Hong Kong, Singapore, UK, Netherlands, Germany and Bangladesh were among the top 10. In 2023-24, the pattern is more or less the same.

So in my view, we are not really expanding the base, which is important. Even if you look at the products which commit, say >US$ 10 billion, which are the chapters?

The answer will be petroleum products (HS 27), gold and silver (HS  71), mechanical machineries (HS  84), chemicals (HS  29), automobiles (HS  87), pharmaceuticals (HS  30), electrical (HS  85), iron and steel (HS  72, 73). Almost same structure you find in all five years.

Why are we not looking at specifically promoting other chapters? We need a very product specific program that should not be generic in nature. Secondly, we also have to look at catering to MSMEs, which contribute roughly about 45% to exports. But then at the ground level, there are a lot of problems to be addressed pertaining to ease of doing business.

The government is indeed working on it, but it needs to be more focused to ensure that decision making is digitised. For example, I apply for authorization. It should not be signed by someone. The system should take care of it, if the details are filled properly. If I want to redeem my case, the same procedure should be followed. If we reduce the manual interference and make a system, which is completely open, technology-oriented and safe, I think that will help.

India Business & Trade: Okay, so broadly, the chapters haven’t changed. But we have, for instance, witnessed some very interesting growth patterns in a category like mobile phones. So what are the positives that you see?

Sudhakar Kasture: I personally feel that two very good schemes are Districts as Export Hubs and Daak Niryaat Kendras. In my personal belief, when anybody thinks of export activity, the person either think of a seaport or airport. Then exports automatically get concentrated over few cities or coastal areas. If you really want to ensure that a large number of people contribute to exports, then Daak Niryaat Kendras are a great step forward

Also, look at e-commerce trade, which is globally close to US$ 8 trillion. Why can’t we set a target of, say US$ 100 billion for India through these mechanisms? And then at every district level, we have curated products that are specific to India for promotion.

Secondly, we have almost two crore NRIs. Let’s say that each one of them just wants to buy US$ 500 worth of goods from India. What would be my increase in exports? There is a third problem coming out of the DGFT statistics that were presented with the FTP last year.

The numbers revealed that active, active input export codes are only 6 lakh. In other words, we have 6 lakh entities, including proprietors, partnership companies, private limited companies, public limited companies, maybe trusts and other cooperative societies put together, and the population is 142 crores. Now compare this with a country like Germany where population is 8.4 crore and exports are US$ 1,500 billion. So what is the awareness reaching at the ground level? If I continuously feel I have to go to the city or port town to be able to export, then it’s not going to work.

Moreover, the ecosystem should be strengthened, especially from a layman’s perspective. For a common man, don’t talk about a 40-feet container. That’s not his way of living. He wants to export five kilos of rice. Explain to him how best he can do that. And then I have 100% confidence in our entrepreneurship. If the Chinese could do it, then why can’t we?

We should promote Districts as Export Hubs and Daak Niryaat Kendras and make the processes as easy as possible. That will give us the base for local products, which are not primarily import dependent. And that will automatically support the Aatmanirbhar Bharat scheme.

India Business & Trade: With the kind of technology development and support system we have today, would you say that it’s relatively simpler for anyone to start an export business? And if so, what would be the primary guidelines you would give to anybody who wants to enter this field? 

Sudhakar Kasture: Firstly, in my personal belief, he must know about the customs and logistics operations carefully, because that is normally not taught in our graduation system. The so-called people teaching this often have little in terms of practical experience. So what do you expect him to contribute? It’s neither as difficult nor as simple as you think. This is a knowledge-based business and we need to understand this.

Furthermore, I would like to use one term that I took from Germany, as I also teach at the Indo-German Training Center. The term is PESTLE (Political, Economic, Sociological, Technological, Legal and Environmental) analysis, which is important to understand. Environmental factors are very critical currently, so it is important for you to understand circular economy and ESG. My personal feeling is that even though he may face challenges, any person who has a common intelligence and is passionate about exporting will be able to do it.

That’s why I am saying again and again that courier exports or exports through Daak Niryaat Kendras have to be expedited. Then the common man can say, “Okay, I need not learn everything. I should go for this particular aspect and just start. When I acquire certain size, then I’ll think about adding my education on other aspects.”

India Business & Trade: The government launched the Foreign Trade Policy 2023 with an objective of US$ 2 trillion in exports. So how do you feel India can achieve this target or what kind of further initiatives will be crucial in the coming years to help us achieve that target by 2030?

Sudhakar Kasture: There are three critical aspects in my personal opinion. Firstly, we need to sort out our FTA negotiations. This is critically important because that will give me market access and reduce my trade and tariff barriers. Here, I am not saying that the duty has to be reduced. All I am saying is that you create an environment where my products are acceptable to the other person.

My observation has been you cannot talk only of processing exports. You cannot force it on the other country that you have to buy things from me. Instead, you have to look into his understanding and mindset. An FTA, according to me, is like arranged marriage in a Hindu family. You don’t have just parents; you also have father-in-law, mother-in-law, relatives and responsibilities. The success of a marriage depends on the contribution of all these factors.

When a company looks to invest in India, it will have its own safety and growth potential in mind. On the other hand, if somebody else is saying, “No, I will promote my products, but I will not allow you on the specifics of it,” that does not work. We should concentrate on a win-win situation.

The second thing is that we need to look into is little bit of psychological change also. On the lighter side, if you see Bollywood movies over the past 50 years, the importer and exporter is most of the time projected as a villain. He is never a hero. This perception has to change.

For example, if you have defaulted on your fulfilments under any export promotion scheme, I will put you in denied identity list. What is this denied identity list? It restricts me from availing further export benefits. Now, the moment I am declared to be in the denied identity list, all other operatives know, because it is available online. But there needs to be a more proactive approach on the government side to help such companies sort out their problems in an expeditious manner.

Recently, a company has approached me asking that they want to do job work abroad. So they want to get a mould done from a second country and then export it to a third country. This kind of arrangement is only available in the foreign trade policy for export-oriented units. A normal person wants to do this. Look at the problems. How do you manage your Export Data Processing and Monitoring System (EDPMS), because there is no connectivity. Who is the final buyer? Who is the job worker? How will I remit money? How does that get accounted for? By sorting out such issues, we can help exports grow by a level of at least 15% per annum, as we are targeting.

Generally speaking, we are exporting to some major developed countries – US, South Korea, Japan, Australia, New Zealand, EU. But compared to this, we are not focused on regions like Africa and Caribbean countries. I was looking at the statistics presented by DGCIS. They reveal that there are more than 100 countries where India’s exports are less than US$ 1 billion. Why can’t I make a target that, okay, I will only increase export by another US$ 1 billion to each of these countries, which will increase my exports by another US$ 100 billion? But this requires a specified effort dedicated for that particular country with focused research. One has to look at the specific requirements of each country, and decide on a strategy based on that.

India Business & Trade: What is your view on the DESH scheme, which was introduced by the government and as a replacement for SEZs. How can India leverage its SEZs to replicate China’s success, since we can’t link incentives to exports?

Sudhakar Kasture: My observation has been in India, SEZ as a concept was received more from a tax sensitive point of view. Originally people got attracted to this concept because of that. In theory, it was that we have to develop the infrastructure, which will deliver cost competitive goods of a high quality desired in international market. That was the original idea, but unfortunately, it is completely driven by tax.

So first, I would like to say that if we want to convert DESH, we have to focus purely and purely on infrastructure and reduction in cost because of the advanced facilities. And we should not promise any other incentives. The SEZs will give you an ecosystem where you can do your business more effectively, in a more concentrated manner at competitive rates, maintaining the quality. Then wherever connectivity is required for, say, services sector, expansion of services sector, and utilization of space already created, you may want to relax certain rules in that aspect. So I agree with Baba Kalyani’s report emphasising the shift to  employment & economic enclave. We should focus more on how best I can service you, how best I can deliver the goods, shipping infrastructure, etc.

India Business & Trade: We have moved to a China plus one focus, you know, in the past two years and especially of course post COVID and we are also seeing that Indian economy is viewed as resilient in the face of the global challenges. So what do you think are the positives we should take away for India as it, you know, endeavors to take that manufacturing space from China in the coming years?

Sudhakar Kasture: The answer to this is actually more geopolitical. You think of four or five countries – Russia, China, US, UK and EU. If you consider these and if you look at their political differences, who exactly do you support? Or would you like to maintain an independent relationship with each one of them? One good example of this is invoicing in rupees. It’s a very good concept. Agreed. But this is possible if you have bilateral trade.

If I buy US$ 30 billion worth of goods from Russia, but export only US$ 5 billion, what will we do with the balance converted currency? So there has to be a bilateral trade between countries and first we will have to create a policy where in the true sense, we are not affiliated only to one group. We will have to maintain that, although it’s a very difficult task.

If we really want China plus one, then we have to make our entire atmosphere conducive to business. And you have to remove small bottlenecks like registering a company, investments, etc. What are your difficulties? Why are you not thinking of shifting to India if you feel you are not safe? We’ll have to do a factual study that how many industries have moved from China to Vietnam, Thailand and Malaysia, and how many have actually come to India. What are the real reasons? If we pursue it in this particular fashion, yes, we have a great chance.

Do I need to promote imports? The answer is no. Every single country in the world is interested in India, with its  population of 142 crores. So you will always be a very attractive destination for me. Now I want to set up business in your country. You are a promising market, but how will I survive? What are the regulations? How do I establish myself? Will I have any problems related to any kind of transactions? Then data privacy, technology transfer, IPR – there are N number of issues to be sorted out. For a size of India, we require 20 GIFT cities. Think from that angle. How can we go about it? What is my priority?

And most importantly, I personally feel that you have to be passionate about exports. If I’m happy with my local market, why do I bother about doing all these things? You have to create that passion for things. If we can create that in the younger generation, then it will work.

And one last thing I would like to give you, why do people choose the US or EU as an education destination? That is because it is promoted like that. And the person who is going to take admission believes that this is what he’s going to get it. Can we create that atmosphere that a foreign company coming into India believes I will grow over here? If yes, things will work out.

In fact, I feel, we should stop all comparisons. India should only talk about per capita exports and how to increase them. At the same time, we’ll have to care about sustainability and environment. This has to be a passion for every single person living on this earth.

---

Sudhakar Kasture is a leading consultant in International Trade, since last 40 plus years. He is consultant and advisor to many National & Multinational Corporations, Public limited and private limited companies etc. He has been associated with CHEMEXCIL in the capacity of Consultant since last 20 years. He is a Director of Helpline Impex Pvt. Ltd. and a Partner in Generation Next Business Consulting. These are reputed consultancy firms offering various advisory services on international trade related issues.

He is Mentor at EXIM Institute, which was founded by him to impart vocational training in the field of International Trade. The institute has imparted education to more than 5500 students in last 27 years. At present, EXIM Institute runs Advanced Certificate Programme in International Trade (ACPIT) , Advance Certificate Program in Customs Laws and Procedures and also conducts customized corporate training programs for various Organizations.