Export Preparedness Index (EPI) 2020

Export is an integral component of India’s development strategy, especially since exports constitute one of the four pillars — the other three being human resources, investments, and governance—upon which the country has traditionally relied on to accelerate its growth.

Exports status so far

    • India’s merchandise exports have witnessed growth from USD 275.9 billion in 2016–17 to USD 303.5 billion in 2017–18, to USD 331.0 billion in 2018–19.

    • And in 2019-20, India achieved a record high of USD 330. 07 billion of merchandise exports, registering positive growth of 8.75%.

    • However due to COVID-19, India’s exports shrank by 60 per cent in April 2020.  

    • Further, the pandemic resulted in large-scale disruption in global supply chains and demand, resulting in the cancellation of orders. 

    • As of present, 70 per cent of India’s export has been dominated by five states – Maharashtra, Gujarat, Karnataka, Tamil Nadu and Telangana

EPI Goals

NITI Aayog in partnership with the Institute of Competitiveness released the Export Preparedness Index (EPI) 2020.  The primary goals of the Index are to inculcate competition among all states in India in order to:

    • bring favorable export promotion policies,

    • ease regulatory framework to prompt subnational promotion of exports

    • create necessary infrastructure for exports, and

    • help in identifying strategic recommendations for improving export competitiveness.

The structure of the EPI includes 4 pillars

    1. Policy: A comprehensive trade policy provides a strategic direction for exports and imports.

    2. Business Ecosystem: An efficient business ecosystem can help states attract investments and create an enabling infrastructure for individuals to initiate start-ups. 

    3. Export Ecosystem: This pillar aims to assess the business environment, which is specific to exports.

    4. Export Performance: This is the only output-based pillar and examines the reach of export footprints of States and Union Territories.

Besides there are 11 sub-pillars

    1. Export Promotion Policy

    2. Institutional Framework

    3. Business Environment

    4. Infrastructure

    5. Transport Connectivity

    6. Access to Finance

    7. Export Infrastructure

    8. Trade Support

    9. R&D Infrastructure

    10. Export Diversification

    11. Growth Orientation

Immense potential of Indian economy to become a strong exporter depends on the strengthening of states and union territories. To realize this vision, the Export Preparedness Index 2020 evaluates states’ potentials and capacities. It is hoped that the detailed insights from this Index will guide all stakeholders towards strengthening the export ecosystem at both the national and sub-national levels.

Some highlights of the report are

    • India has scored an average of 39 on the index showing the tremendous potential that India holds towards transforming into an export-based super economy.

    • Both Policy and Business Ecosystem are the two highest scoring pillars, with the Export Ecosystem being the least scoring pillar. 

    • Major reasons why India has a weaker export ecosystem range from poor trade support to the inability of the states to build export hubs. Ex: Only 9 states have

    • projects approved under TIES, which is supposed to act as an inducement to the states to channelize funds from the centre towards the creation of export infrastructure. 

    • Low export credit also remains a challenge since most of the states don’t have any form of loan facilities to be provided to the exporters.

    • Of the Coastal States, Gujarat, Maharashtra and Tamil Nadu occupy the top three ranks, respectively.

    • Gujarat has topped the index with a strong display in various sub-pillars such as Export promotion policy, Business Environment and Infrastructure. 

    • Six of eight coastal states feature in the top ten rankings, indicating the presence of strong enabling and facilitating factors to promote exports.

    • On the other spectrum, Andhra Pradesh leaves room for major improvements. Andhra Pradesh might have an enabling business infrastructure, but the state does not

    • have a proper export ecosystem in the place. 

    • In the landlocked states, Rajasthan has performed the best, followed by Telangana and Haryana.  Bihar and Jammu and Kashmir are some of the weaker states in this category.

    • Among the Himalayan states, Uttarakhand is the highest, followed by Tripura and Himachal Pradesh. The other six Himalayan states lack freight management, multi-modal hubs, as well as inland container depots.

    • Across the Union Territories, Delhi has performed the best, followed by Goa and Chandigarh.

    • Many northeastern states under the Growth Orientation sub-pillar were able to export more by focusing on their indigenous product baskets.

    • Challenges to export promotion in India

        ◦ intra- and inter-regional disparities in export infrastructure

        ◦ poor trade support and growth orientation among states

        ◦ poor R&D infrastructure to promote complex and unique exports

    • Strategies to address the challenges

        ◦ a joint development of export infrastructure

        ◦ strengthening industry-academia linkages

        ◦ creating state-level engagements for economic diplomacy

        ◦ Focus on designs and standards to make products export-ready

        ◦ New use cases for products

(The author is a trainer for Civil Services aspirants. The views expressed here are personal.)