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2024-25 Budget: Prioritising Export-Led Growth
Context:
Despite global challenges, India’s merchandise exports grew by 2% (April-November 2024). The upcoming FY26 Budget, set for February 1, 2025, is expected to announce measures to strengthen India’s export sector.
State of India’s Exports in April-November 2024-25:
- India’s exports grew by 1.95%, reaching $283.7 billion, up from $278.3 billion during the same period in 2023.
- Organic produce, including turmeric, emerged as a priority area for export growth.
Importance of Export-Led Growth:
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- Identified as one of the key growth drivers alongside capital expenditure and PLI schemes.
- Export growth promotes:
- Employment generation.
Foreign exchange earnings.
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- Greater integration into the global supply chain.
Economic Survey 2019’s Views on Export-Led Growth:
- Advocated for a greater focus on export-oriented industries to achieve sustained economic growth.
- Highlighted the importance of diversifying export markets and reducing dependency on traditional markets.
- Recommended improving logistics, infrastructure, and ease of doing business to boost export competitiveness.
- Emphasised leveraging India’s comparative advantage in sectors such as agriculture, pharmaceuticals, and IT services.
Key Steps Government Should Take to Boost Exports:
- Interest Subvention Scheme for MSMEs
- Introduce interest subvention incentives for micro, small, and medium enterprises (MSMEs).
- Reduce the high cost of credit for exporters.
- Interest Equalisation Scheme (IES)
- Relaunch IES for five years, providing cheaper rupee credit for pre-shipment and post-shipment activities.
- Originally launched in 2015, it was extended multiple times until December 31, 2024.
- Free Trade Agreements (FTAs): Prioritise FTA negotiations with Oman and the UK to provide a competitive edge to Indian exporters.
- Boost Agricultural Exports
- Establish the National Turmeric Board to:
- Promote R&D and value addition of turmeric products.
- Target turmeric exports of $1 billion by 2030 (from $207.45 million in 2022-23).
- Initially funded by the Spice Board, with dedicated budget allocation expected in FY26.
Challenges in Developing an Export-Led Growth Model:
- Global economic headwinds affecting demand for Indian exports.
- High logistics costs and inadequate infrastructure.
- Limited penetration of FTAs with significant trading partners.
- High credit costs for exporters compared to global competitors.
