India can look at incremental exports growing by $20 billion (in the least favourable outcome) to a significant $193 billion jump in the five-year horizon only if it builds its capabilities and captures share from China, according to State Bank of India’s economic research report ‘Ecowrap’.
Although 2020 is a lost year in terms of trade, India can think long-term and build relations so that it can occupy the space vacated by China, the report said.
India has a very small manufacturing base as compared to China and the government will have to give a significant push, both in terms of strategic relations and structural reforms, it added.
“When we look at the value of merchandise exports for 2019, China exported $2.5 trillion worth of goods, while India exported $0.3 billion worth of merchandise. This means that China exports seven times the amount of goods India exports in a year,” Soumya Kanti Ghosh, Group Chief Economic Adviser, SBI, said.
The report said the manner in which India manoeuvres the geo-political space will clearly determine how successful it is in becoming an export behemoth.
“With just 1.7 per cent in global merchandise exports, India has a long road ahead to catch up with China. But it must be now, now and now !” it said.
Referring to Vietnam, which has rapidly captured merchandise exports, the report observed that it is also said that a fair number of the factories being rapidly put up in that country are owned and financed by the same Chinese companies being dislodged in their home country. However, there is no denying the fact that Vietnam has gained in this trade war, with its cheap labour and cheap currency.
Ecowrap noted that although the Revealed Comparative Advantage (RCA) for India is lower than China as far as capital goods exports are concerned, India can still capitalise on this opportunity to push its capital goods exports. However, the bigger opportunity right now is in the consumer goods sector, in which India has an RCA greater than China, it added.
Within consumer goods, the biggest concentration of micro, small and medium enterprises (MSMEs) in the country is in the textile and clothing sector (17.30 per cent), followed by food products (12.30 per cent) and crop and animal production (10 per cent).
“Although we do have comparative advantage in textiles and animal goods, in food products we are not competitive. The government can give a direct push to this sector, so that MSMEs involved in the manufacture of food products are benefitted,” the report suggested.