India’s laid out an ambitious target of hitting $2 trillion annually in overall exports by 2030 as the South Asian country makes a renewed push to become a top choice for companies shifting supply chains away from China.
The projections by the Trade Ministry are more than double an overall $900 billion yearly target between 2015 and 2020, which was repeatedly extended as officials blamed pandemic-related disruptions for the missed deadlines.
While officials have spoken about achieving $2 trillion in merchandise and services exports in the past, this is the first time it’s been stated as policy. This comes as India chairs the Group of 20 forum this year and Prime Minister Narendra Modi’s government has been touting the potential of the nation, which is set to become the world’s fastest-growing large economy over the next three years.
“We have to meet our exports targets going forward,” Trade Minister Piyush Goyal said at a briefing Friday. “We will achieve $2 trillion in exports by 2030, but we should ensure merchandise exports don’t fall behind services exports.”
Services exports have been going strong in the last few months, in part due to the growth of back offices of multinational companies that have become business-critical operations. A recent HSBC Holdings Plc report showed that India is home to about 40% of these so-called global capability centers and their numbers will rise.
Despite the buoyant projections, officials at the ministry have warned that meeting export goals for goods will be slightly challenging this year. India’s goods trade has been falling in recent months as tighter monetary conditions and higher prices crimp demand globally.
Earlier, an official said India’s overall exports would hit $770 billion in the current fiscal year ending March 2023, a record level though it falls short of the previous $900 billion target.
Economists say the target requires both strong global economic growth and a shift in India’s market share. “While difficult, it is still a good development as a goal-setting process, since it increases the stakes for both the government and the corporate sector to meet the targets,” said Rahul Bajoria, an economist with Barclays Plc.
India over the past year has been pursuing bilateral trade deals with a range of countries, including Australia, the UK, and Canada, shifting from the usual go-slow approach to such agreements. It’s also building boosting ties with the US and Japan under the so-called Quad, a grouping of democracies set to counter China’s economic and military assertiveness.
Whether that translates to a shift in supply chains and strong export growth remains to be seen.
Manufacturing in India accounts for less than 20% of the economy, a figure that has remained stuck for decades, and unemployment remains stubbornly high.
Modi’s “Make in India” campaign, which aims to increase exports and boost jobs, hasn’t gained much traction so far. Since the campaign was launched in 2014, the deadline to lift the share of manufacturing in GDP to 25%, has been pushed back three times, from 2020 to 2022 to 2025 with officials again blaming the pandemic.
Streamlining labor laws and ensuring access to land are some of the hurdles, apart from bureaucratic delays, that await companies looking at India as an alternative to China.
India’s government is betting the G-20 presidency will help change perception and beat back competition from the so-called tiger cub economies of Southeast Asia that include Vietnam, Malaysia, Philippines, and Indonesia.
“They are working on filling the loopholes, working on the bottlenecks, which have kept India behind its peers on manufacturing exports,” said Madhavi Arora, lead economist at Emkay Global Financial Services Ltd. “It should yield results in the coming decade or so.”