India says restructuring export basket a must for growth similar to Bangladesh

Friday, 5 February 2021

India needs to restructure its export basket on lines of Bangladesh for achieving achieve high growth in exports, says Economic Survey, an annual document of India's Ministry of Finance.

It adds that India’s current approach violates the first principles of trade theory in economics. The Survey has used the example of India’s eastern neighbour Bangladesh to explain what needs to be done, reports Hindustan Times.

The report mentioned that Bangladesh’s exports grew at 8.6 per cent in the last decade (2011-2019), whereas India’s export growth was a paltry 0.9 per cent.

"One of the biggest reasons for India’s poor export performance is that it is not exporting goods where Indian manufacturers have an edge vis-a-vis the rest of the world."

This is against the basic principle of modern trade theory of comparative advantage which says that a country should export goods which it can produce cheaply and import goods which are more expensive to produce domestically.

"Both India and Bangladesh are considered to be labour abundant economies and therefore expected to have a comparative advantage in producing goods which are labour intensive."

While Bangladesh’s export basket is in keeping with this economic reality — textiles, footwear and apparel constitute 90 per cent of its exports — around 40 per cent of India’s exports are capital or technology intensive. Using the Bangladesh’s export example, the survey asked the country’s (exporters) to learn from this and specialise in products in which it is competitive.

Biswajit Dhar, professor of economics at Jawaharlal Nehru University, said that successive governments have treated the export-oriented labour intensive MSME’s such as textile industry as a sunset sector. According to him, for such sectors to grow there has to be fundamental change in government approach towards them.

“There has to be effective dialogue between the government and the industry to address the pain points like- infrastructure problem, labour issues and others just like Bangladesh has done,” he added.