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India’s Exports: From Meluha to Now

Time to chart a new course

Dr Rajiv Pathni

Meluḫa is the Sumerian name of their prominent trading partner during the Middle Bronze Age
(around 2600 BC). Most scholars associate it with the Indus Valley Civilization. Their major
exports were commodities like spices, textile, timber, gems, grain, copper, etc.

It appears that several millennia later the focus of India’s exports remains on goods trade. This is
despite the decreasing margins, increasing competition from other countries, lower labour cost
arbitrage, and a host of other issues. The WTO guidelines restricting incentives for exporters
would further make it even more difficult for them to continue profitably after 2020.

The Government is ably leading the charge with a slew of measures to improve the ease of
doing business (we moved to World Bank rank 77 from 142 in 2014), bringing in more
transparency, promoting digital transactions, etc. However, some lament that we do not speak
from a position of power. And that may well be true.

However, in exports we may be missing the woods for the trees.

Need a Change of Focus

We have a continuing trade deficit in foreign trade, the


only silver lining being the services sector where we
have a trade surplus. India’s services sector accounts for
55.2% of gross value added. But this sector has been
merely a blip on the radar of the authorities till now.
Earlier this year the government changed course.

Recognizing the potential of the services sector, the


government has approved an action plan for 12
Hon'ble Min of Commerce & Industry
'champion' services sectors for realising their potential at CII Export Summit (26 Oct 2018)
through establishment of a Rs 5,000 crore dedicated
fund. These include IT & ITeS, Tourism and Hospitality, Medical Value Travel, Transport and
Logistics, Accounting and Finance, Audio Visual, Legal, Communication, Construction and
Related Engineering, Environmental, Financial and Education sectors. The commerce ministry is
working with different ministries to formulate separate plans with a view to boost growth in
these segments.

This is in addition to some other measures which have already been taken by the government
last year :

 India is working towards trade facilitation agreement (TFA) for services, which will help
in the smooth movement of professionals.

 Incentives provided under SEIS have been increased last year

 The Government is working to remove many trade barriers to services in the WTO.

All developed economies have a significant focus on the services sector. India has the required
HR capital and knowledge base for exporting services. We have already excelled in IT and ITeS
sector. With the right kind of stimulus, the other sectors will also flourish.

However, the services sector requires synergy across multiple domains. For instance, Medical
Value Travel (a.k.a. Medical Tourism) needs not only world class hospitals but also visa support,
affordable quality accommodation, language support, etc The hospitals themselves need
internationally recognized accreditation and networking with insurance providers and TPAs to
ensure seamless and trouble-free treatment.

If we want to be counted amongst developed nations, we must go beyond legacy systems of


goods trade. The government is willing and providing support.

Do we have it in us to go beyond the Meluhan trade? Can we realize our true potential in
services sector in the near future?

-- *--

Dr Rajiv Pathni, an IAF Veteran, accomplished PhysicianExecutive, alumnus of AFMC and AIIMS,
recipient of prestigious WHO Fellowship at Liverpool School of Tropical Medicine, UK.
(Submitted to IIFT (Exec prog on Int’l Business Management))

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