Labour Intensive Exports

Measures taken by the Government of India to boost exports:
  • Incentivized specific sectors such as ready-made garments and footwear.
  • Duty-free procurement of the inputs needed for exports on a self-assessment basis.
  • A New logistics division has been established in the department of commerce to coordinate development in the logistics space.
  • These measures, along with recent changes in the goods and services tax, are likely to help the export sector.
Reforms needed:
  • India needs structural changes to be able to attain higher and sustainable exports growth in the medium to long run, particularly in labour-intensive sectors.
  • India needs to work on increasing competitiveness to expand its exports share in the world market.
  • India needs to improve logistics to increase efficiency, both in terms of the time and costs involved.
  • The government will need to move forward with reforms in the factor market. India has a large number of small enterprises, which are not in a position to attain economies of scale and compete in international markets. As the Economic Survey highlighted, Indian firms in the apparel and leather sectors are smaller than those in China, Vietnam and Bangladesh. The reason for this is regressive labour laws. Firms in labour-intensive sectors will need more freedom to operate. Similarly, more flexibility in land acquisition will also help the manufacturing sector.
  • Threat of rising protectionism: ¬†India needs to be prepared to protect its interests without compromising on its open trade policy. India has always supported rule-based multilateral trade negotiations under the WTO. But as progress has been limited in recent years, it should also look for opportunities to reduce trade barriers at the regional and bilateral levels.
  • Currency competitive:¬†This is not to suggest that India needs an undervalued currency, but the Reserve Bank of India (RBI) should not allow the rupee to appreciate sharply. The RBI has done well in recent months to absorb a significant amount of the foreign exchange flow by building reserves to keep the rupee in check.

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