Global ambitions, local lens: Niti Aayog’s state-level export preparedness report misses the big picture

Evidently, a lot of work has gone into it. Unfortunately, though, a missing macroeconomic perspective on export success dims the glow of its little gems of fact and insight.

The notion that individual states and districts within states can boost exports just on the strength of their initiative and drive is dubious. Take the 50% import duty that the US has levied on non-services, non-pharma exports from India. Garment exports from India have been hit, regardless of how prepared our garment-exporting states have been to support shipments.

The exchange rate is a crucial variable that determines how much a country can export and that is beyond the control of any state government. Access to foreign markets is majorly influenced by trade deals and partnerships, apart from the ability to figure in global supply chains.

Neither is a state-specific capability. The forging of supply network links is a function of nation-level industrial policy, supported with funds for design, R&D and infrastructure.

The cost of capital, similarly, is under control of the central bank’s monetary policy committee. Import duties on inputs are critical determinants of how viable particular exports are, regardless of where production is located.

Sometimes, non-tariff barriers, such as stiff quality norms, are as significant a factor shaping input costs as tariffs. States could lobby to have these duties altered, but these are for the Centre to determine. High import duties on synthetic yarn and fibre have constrained India’s garment industry, for example, because most of the clothes bought by the world are made of synthetic fabrics or blends.

At times, one state’s export success could be constrained by another state. Take the case of a town whose nearest port lies in another state where roads are in such disrepair that they hinder access to docks and slow shipments. Measuring the export preparedness of the town in question and the state in which it is located falls short of a realistic assessment of their potential.

Also, some states specialize in exporting skilled labour, which generates high remittance income for the entire nation. The report’s parameters overlook this. While it does acknowledge the value of service exports, tourism included, its indices fail to reflect their importance.

Should we then conclude that the entire report represents wasted effort? That is not the case. It does serve to alert states to their shortcomings, particularly in relation to other states, in various areas that matter for broader economic efficiency. State administrations should look into these and close the gaps that hold them back.

Merchandise export success, however, calls for a lot more; for the coming age of AI, we may even need a whole new approach. AI, in combination with advanced robotics, looks set to turn many labour-intensive sectors into capital-intensive ones. At the same time, many new opportunities are likely to open up. Studying such aspects of the future would be more useful than such a report.