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In a first of its kind address to heads of Indian missions abroad, Prime Minister Narendra Modi laid down a roadmap on how India can benefit and increase exports in the post Covid world.
In a dramatic move last week, India amended the Income Tax Act to put an end to the contentious retrospective tax law that had caused so much damage to its reputation as a destination conducive for business for overseas investors. A legacy of the previous UPA government, the clause had put India in the crosshairs with two major British firms--Vodafone and Cairn, and by finally doing away with it, the current NDA government led by Narendra Modi has given the clearest signal yet that India means business.
Addressing the heads of Indian missions abroad, Modi was quick to refer to the development as he sought to make a clear distinction between the India of the past and the one re-energised over the last 7 years. The basic message was simple--India knew its rightful place in the world and unlike in the past it would not hesitate to take any step needed to get there.
“The decision to get rid of retrospective taxation shows our commitment and consistency in policies. It sends a clear message to all investors that the decisive government of India is not only opening doors to new possibilities but also has the will to fulfill its promises,” Modi said.
Modi’s ambition to make India an export powerhouse isn’t new. In his very first year itself in 2014 when he launched the Make in India programme, it was based on the foundation of Indian manufacturing making high quality zero defect products for the world. Decades of archaic rules and regulations and a snail paced bureaucracy have stymied progress on this front and the pandemic has dealt a telling blow but Modi’s optimism is undiminished.
“Today the world is getting smaller and smaller every day due to physical, technological and financial connectivity. In such a situation, new possibilities are emerging around the world for the expansion of our exports,” he said. “When we had the highest share in the global economy, it was due to India’s robust trade and exports. We have trade links and trade routes with almost every part of the world. Today, as we try to reclaim that old stake in the global economy, the role of our exports is very important. In the post-Covid world, when there is an extensive debate on the global supply chain, we have to maximize our efforts to take advantage of the new opportunities.”
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Currently, exports constitute 20 percent of the country’s GDP at under $ 300 billion in fiscal 2021. In this context the government has set a steep merchandise exports target of $ 400 billion for FY22 and $1 trillion in the next five years.
To achieve that, Modi knows manufacturing has to pull up its socks. To help the industry the government has come up with a host of schemes including the cross-sectoral PLI scheme that subsidizes and incentivizes companies on achieving scale.
Further, recognising that the MSME sector, which has borne the brunt of the ill effects of the pandemic, forms the bedrock of India’s manufacturing, it has also extended an Emergency Credit Line Guarantee Scheme of Rs 3 lakh crore. On top of this another Rs 1.5 lakh crore has been approved recently to encourage recovery and growth.
“The manufacturing in the country has to increase manifold and it should be qualitatively competitive. There is a new class in the world which focuses on quality more than price. And we have to address this issue,” Modi said. “Secondly,there should be an end to the logistics problems of transport. In this regard, the Centre, state governments and private players have to play their part. Thirdly, the government has to walk shoulder to shoulder with the exporters.”
Bolstering manufacturing alone will not do the trick. Modi also pointed out the need to explore more markets and diversify the product basket and wants the missions to work in this area.
“We also have to work to create new market destinations for new products. Our missions abroad can determine, for example, if we are exporting to three destinations in the world, can’t we add five new destinations?” he said. “At present, almost half of our exports are limited to only four major destinations. Similarly, about 60 percent of our exports are related to engineering goods, gems and jewellery, petroleum and chemical products and pharmaceuticals. We need to introspect that such a huge country is not reaching out to the world. We need to remove those anomalies.”
After the clarion call for self-reliance, Modi’s India has set its sights on the world.