Exports are the way forward for the Indian economy
A vibrant debate is currently underway in India, and indeed across several emerging markets, about the pace of recovery from COVID-19, the extent of any permanent damage, and the nature of the policy response.
- With public sectors confronting a mountain of debt, the fiscal will need to be reined in post-COVID across several emerging markets.
- Further, COVID is only likely to accentuate the prevailing export pessimism, as global potential growth is damaged and protectionist instincts are stoked.
- More reforms are required is tautological. Instead, the choice and sequencing of reforms will depend critically on the growth philosophy India embraces.
- Global merchandise exports stood at almost $18 trillion in 2017 (more than six times India’s GDP) with India commanding an export share of just 1.7 per cent (versus China’s 12.8 per cent).
- Therefore, even if the global market shrinks to $15 trillion — an unlikely prospect — India could double its exports by raising its global market share to just 4 per cent. The opportunity is huge.
Challenge from automation
- For many labour-intensive tasks, automation is still infeasible.
- Adidas, for example, produces only 1 million of its 360 million pairs of shoes in automated factories.
- Reclaiming makes the often-forgotten case that the opportunity for labour-intensive manufacturing has not passed us by.
- In fact, the timing couldn’t be more fortuitous.
- Chinese real wages are rising, the workforce is shrinking and the embattled relationship with the US appears more structural than cyclical.
- This is India’s moment to integrate into the Asian supply chain by attracting multinational companies seeking a China hedge in the region.