India Exports - Making the most of what we have

1 Real GDP average for FY2019

2 UNCTADSTAT. Revealed comparative advantage (RCA) is based on Ricardian trade theory, which posits that patterns of trade among

countries are governed by their relative differences in productivity. Country A is said to have a revealed comparative advantage in a

given product i when its ratio of exports of product i to its total exports of all goods (products) exceeds the same ratio for the world as a

whole. https://unctadstat.unctad.org/EN/RcaRadar.html

3 Hausman, Hidalgo et al. The Atlas of Economic Complexity. Mapping Paths to Prosperity

Today’s world is faced with a changed political and economic order which is promoting inward looking policies in a bid

to appease certain sections of the population, which have become increasingly disenchanted with the globalization led

growth model, which has stood the world in good stead for the last few decades. These sections, are mainly the middle

classes in the developed world that have essentially missed out on the positive externalities of the hyper-globalisation

phase seen since the 1990’s. Most of the benefits have accrued to developing economies and the higher strata of the

developed world. Inward looking policies are manifesting themselves in trade wars which are having negative

ramifications across the globe with IMF downgrading global growth projections. Recent events have increased global

risk aversion, with US-China trade wars threatening to escalate into currency wars. In such a world order, countries like

India where the external sector is not a primary growth driver is relatively insulated. However, in absolute terms,

exports contribute ~21% to GDP1, (although in net terms the external sector is not a large determinant of aggregate

demand) and protracted trade wars would have a negative impact on this lever over time thereby detracting from

growth. Our estimates suggest that a 1% fall in exports could lead to ~20 bps impact on real GDP growth, all other

things remaining constant.

This paper finds that India’s export sensitivity to global growth is very high. However, given it is exogenous and not

within our control, policies to support sectors in which we have an RCA (Revealed Comparative Advantage)2 in could

provide a buffer to our export growth and in our view mitigate the repercussions of the current global environment on

India’s growth.

Following are the key takeaways from the paper:

India’s export growth is determined by global growth and not so much by Rupee movement: Our econometric analysis

shows that India’s export growth is driven by global exports, with a 1% increase in global exports leading to a 1.13% in

domestic export growth. On the other hand, Rupee movement has an insignificant impact on India’s export growth.

India ranks relatively low in export sophistication with products in which it has a Revealed Comparative Advantage

(RCA) in being mostly primary products (rice, crustaceans, spices etc.): Inspired by research done by MIT3 we create an

export sophistication index which shows that India ranks low even amongst its EM peers in degree of sophistication of

its exports. Export sophistication of a product is defined by the technology and information used to create that product,

with more complex the technology used, the more sophisticated the product is deemed to be. This is reflected in our

export tree mapping also, which shows that India’s exports are dominant in primary goods and products requiring less

sophisticated processes and technological know-how. This provides a unique perspective to policy making.

Higher participation in Global Value Chains and multilateral trade agreements could lead to improvement in export

sophistication over the long term: While moving up the sophistication ladder would in turn lead to improvement in

living standards and improve our economic growth rates, developing these synergies would take time and coordinated

action between policy makers, institutions and entrepreneurs. One way to do so would be through greater

participation in Global Value Chains (GVCs) and participation in more multilateral and foreign trade agreements.

Policy focus on goods that India has an RCA in would help support export growth in the short term: India’s exports

have been performing fairly poorly with weak growth seen from 2012-17, while its share of exports in world exports

has been stagnant at ~2% in 2018. In our view, policy focus on exports in which India has a RCA in would improve its

export performance as well as provide some buffer to the external growth environment. In this regard, export

promotion and incentives schemes enlisted in the Foreign Trade Policy (2015-2020) focusing on MSMEs, labour

intensive industries, agricultural programs through easing trade across borders, export incentives to notified industries,

building of technology parks and industrial clusters, and mentoring and training new exporters are welcome. These in

our view, would be easier to implement and through concentrated action and implementation would alleviate some of

the distress that the export sector is currently facing, leading to higher domestic growth and employment creation.

This especially holds significance given the current global environment.

Occasional

Treasury Research Group

For private circulation only

Anushri Bansal

anushri.bansal@icicibank.com

+91 22 4008 6220

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Figures in brackets are exports as a percentage of total exports; with size of a particular colour reflecting the relative importance in terms

of export value

*The export mapping is inspired by the export tree map in the MIT paper by Huasmann, Hidalgo et.al.

Source: MIT, UNCTAD, UNComtrade, ICICI Bank Research

3

Introduction – laying the framework

Given the above context, the paper first quantifies India’s export sensitivity to global growth and Rupee movement using a

regression analysis. Inspired by a research analysis done by MIT on economic complexity of exports4, we create an export

sophistication index, which ranks countries by the technological advancement and complexity of their exports using the

Ricardian theory of Revealed Comparative Advantage (RCA). India ranks low in the export sophistication index, with its

exports dominated in (and in which India has a RCA in) primary agriculture goods and labour intensive products.

This provides a unique perspective to policy making. In order to climb up the sophistication ladder, India would have to

accumulate know-how and develop synergies often involving a lot of trial and error and coordinated action between policy

makers, institutions and entrepreneurs. This would take time and one possible way to start building on it would be through

greater participation in Global Value Chains (GVCs) – which currently India ranks very low in and more multilateral and

foreign trade agreements. In the interim, however, policy support to boost growth in sectors that India has an RCA would 1)

be easier to implement 2) would expedite India’s performance in global exports (stagnant at ~2%) and 3) help domestic

growth and employment creation.

Keeping this in mind we look at India’s top trade products and partners and take a close look at the export performance of

its top exports by value. We conclude by saying that these are the products that require immediate support. In this regard,

the government’s trade policy focus on export incentives for MSME and labour intensive industries, development clusters,

technology parks and other policies such as the agriculture export policy, MEIS (Merchandise Exports from India Scheme)

are welcome. These measures could help in supporting India’s exports in the short term.

The rest of the paper is structured as follows. Section 1 looks at the data and methodology used for determinants of India’s

exports as well as India’s export sophistication index. Section 2 takes us through our key findings for determinants of

India’s exports while section 3 discusses India’s export sophistication ranking and policy measures which could help move

up the sophistication ladder. Section 4 then looks at India’s trade profile and concludes with how in our view policy support

of India’s top exports, especially those that it has an RCA in, supported by coordinated action, would help support export

growth and in our view provide some buffer against the adverse global trade environment right now.

Section 1: Data and Methodology

India’s export sensitivity to global growth and Rupee movement

We perform a simple Least Square regression on 1) YoY growth of India’s export by value, deflated by India WPI. Our

dependent variables are 1) YoY growth of 36 export weighted REER for the Indian Rupee 2) YoY growth of world exports

deflated by the US CPI.

The data is from 1994-2018 and is in annual frequency.

Export Sophistication Index

We use the Revealed Comparative Advantage (RCA) Index from UNCTAD for creating the export sophistication index. The

data comprises 224 countries and 259 products. For our analysis we use the latest available data which is till 2017.

From the 224 countries we take a sample of 13 countries for our analysis. This includes 5 AEs – Singapore, Japan, USA,

France and Germany and 8 EMs – Malaysia, France, China, Thailand, Mexico, India, Philippines, Vietnam, Cambodia

In order to construct the index, we calculate each country (i)’s export sophistication using:

Step 1: Average (median) Global (all 224 countries) RCA for products that country (i) has RCA>=1

Step 2: Average (median) RCA for country (i) for products where country (i) has RCA>=1

Step 3: Calculating export sophistication as the product of Step 1 and Step 2

Step 4: Standardising results from Step 3, using the mean and standard deviation of average RCA for each country (i) for all

products in the universe (259 products)

Step 5: Based on these standardized results we rank our sample of 13 countries, with lower the value signifying higher the

export sophistication. For e.g. the average global RCA for products that Cambodia and Singapore have a RCA greater than 1

are 0.135 and .07 respectively (Cambodia has the lowest rank (least sophisticated) in our export sophistication index while

Singapore has the highest (most sophisticated). Cambodia’s product advantage lies in primary commodities like base metal

4 Hausman, Hidalgo et al. The Atlas of Economic Complexity. Mapping Paths to Prosperity.

5 Cambodia also exports fur skin which we have excluded from these calculations because it was an outlier, given its very high RCA of

244.9 for Cambodia

4

and scrap, fuel wood etc. which either a few countries have very high RCA in or are common products which several

countries would have comparative advantage in, leading to high global averages. On the other hand, Singapore’s product

advantage lies in products like cathode valves, nitrogen function compounds which most countries will have very weak RCA

in with some countries not producing them at all (given their complexity) leading to very low global averages. Thus the

lower the standardized value, the more sophisticated export basket is, leading to a higher export sophistication ranking.

Having discussed the data and methodology used in the paper, the next section takes a closer look at India’s export

determinants

Section 2: India’s exports a function of global growth and not so much of Rupee movement

Recent data on the external sector shows that India’s exports have been adversely impacted, with June, 2019 exports falling

by -9.7% YoY leading Q1FY2020 exports to contract by 1.7% YoY. Often cited reasons for this fall in exports include 1) the

current global economic slowdown underscored by the continued uncertainties on global trade front with global trade

volume6 remaining flat from Jan – May 2019 (with incoming individual country data pointing towards further slowdown) 2)

Sharp Rupee appreciation with INR REER7 showing a 2.43% appreciation from January to June 2019.

Chart: India exports have been falling mapping global growth and trade

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Source: Bloomberg, CEIC, ICICI Bank Research

In this context, we do a regression analysis8 to assess India’s export sensitivities to both global growth and Rupee

movement. We find that India’s exports are a function of world exports (proxy for world growth) while Rupee movements

do not have a statistically significant impact on India’s exports. Key findings include:

A 1% YoY growth in world exports leads to a 1.13% YoY growth in domestic exports in value terms over a 12-month

period

On the other hand, INR movement as seen through RBI’s 36-country export weighted REER gives insignificant results.

This indicates that there is no meaningful impact of INR movement on India exports over a 12-month period

6 CPB World Trade Volume Index

7 RBI 36-Country Trade Weighted Index

8 Details in Section 1 and Appendix

5

Chart: India export growth a function of world export growth and not so much of Rupee movement

-30

-20

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0

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1994

1996

1998

2000

2002

2004

2006

2008

2010

2012

2014

2016

2018

India exports USD World exports USD(% YoY)

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1994

1996

1998

2000

2002

2004

2006

2008

2010

2012

2014

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India exports USD Rupee REER(% YoY)

Source: Bloomberg, RBI, CEIC, ICICI Bank Research

Our results show that global growth is a key determinant of India’s export growth which in today’s context would look

increasingly threatened. While external growth dynamics are outside our control, in such an environment, synchronized

policy action to provide support to the export sector, could in our view, alleviate some of the risks arising from global

growth on domestic growth.

Keeping this in mind, the next section looks at products that India has an advantage producing and exporting compared to

the rest of the world based the Revealed Comparative Advantage first introduced as a metric by Balassa (1965) and is based

on the Ricardian trade theory.

Section 3: India’s export sophistication – amongst the lowest across EM peers

India’s exports have been performing fairly poorly with weak growth seen from 2012-17, while its share of exports in world

exports has been stagnant at ~2% in 2018. What this implies is that there are other internal factors that are leading to this

export performance which possibly require policy attention.

In this context, we first take a look at the products that India has an advantage producing and exporting compared to the

rest of the world based on the Ricardian trade theory of Revealed Comparative Advantage (RCA). Centered around RCA, we

go a step further and calculate export sophistication ranking9 for India, compared to AEs and peer EMs. This analysis is

based on the economic complexity ranking done by Hausmann, Hidalgo et al.10

In the paper, they explore the ‘social

accumulation of productive knowledge’ which according to them has not been a universal phenomenon and is one of the

prime reasons for difference in living standards across nations. According to the paper, a country’s productive knowledge

is manifested in the complexity and sophistication of the products that it produces. It goes on to say that expanding this

productive knowledge is challenging and would generally take place through accumulating and building upon the existing

set of knowledge. Moreover, to move up the complexity ladder, countries would need to go through several rounds of

iterations and be supported by entrepreneurs, policy makers and investors in this knowledge building. The paper then goes

ahead and ranks countries as per their economic complexity ranking which attempts to measure ‘the amount of productive

knowledge each country holds’.

Our RCA based export sophistication ranking shows that India ranks 10 out of 13 countries that we have sampled.

Concentrated in primary products (rice, crustaceans, spices etc.), India is ranked much lower in sophistication compared to

AEs – Singapore, Japan, USA, France etc. which of course is on expected lines given their levels of advanced production

processes, but even amongst other EMs like Malaysia, Thailand and Mexico India has lower export sophistication.

This ranking, in our view calls for the following policy action for the long term and the short term:

Policy action for the long term - Coordinated policy action amongst several market and public entities would be required to

move up the complexity chain and would be something that India should strive to reach in the long term. One way to do

that would be through integrating in Global Value Chains. India ranks 54 out of 64 countries in GVC participation ranking11

,

9 Details in Section 1

10 Hausmann, Hidalgo et al. The Atlas of Economic Complexity. Mapping Paths to Prosperity. MIT.

11 GVC participation rate = (Forward GVC participation + Backward GVC participation)/Total exports. Forward GVC participation

(domestic value added in foreign exports as a percentage of gross exports of source country) ranking, backward GVC participation

6

much lower than EM peers. The India Foreign Trade Policy Review (2015-2020) acknowledges India’s poor participation in

high value GVC chains and the fact that “Indian producers are at a disadvantage as compared to their ASEAN and East

Asian peers”12

and recommends its facilitation through “a focus on automating ports, custom operations, allowing green

channel clearances and benchmarking turnaround of ships with global practices.”13

One way to achieve this could be through more active participation in bi-lateral and multilateral trade blocs and agreements,

specifically in South Asian and South East Asian trade blocks. In this regard, joining the RCEP (Regional Comprehensive

Economic Partnership) – which is a free trade agreement between the 10-member Association of South East Asian Nations

(ASEAN) and FTA partners - India, China, Japan, South Korea, Australia and New Zealand – could be a step in the right

direction. (Box 1 enlists India’s current trade agreements).

Policy action for the short/medium term – While creating synergies to accumulate productive knowledge would take time,

policy focus to enable exports in products that India has a RCA could help revive the export sector and in turn provide

positive externalities to India’s growth.

Country

Export

sophistication

ranking

Top products by RCA

Singapore 1

Musical instruments, Cathode valves, Nitrogen-function

compounds, Prepared additional, Petroleum oils

Japan 2

Cinematographic supplies, Steam turbines, Machine tools,

Ball bearings, Civil engineering equipment

USA 3 Arms and ammunition, Works of Art, Cereals, Cotton, Maize

Malaysia 4

Animal, vegetable fats & oils, Apparel, Tin, Petroleum gases

and products, Margarine, Natural rubber, Synthetic rubber,

Cathode valves

France 5

Vegetable textile fibers, Aircraft equipment, Alcoholic

beverages, Cosmetics, Unmilled barley, Engines and Motors,

Cheese and curd, Insecticides, Radio actives

Germany 6

Monofilaments, Printing machinery, Transmission shafts,

Motor vehicles, Machine tools, Aircraft equipment

China 7

Silk, Pottery, Lighting fixtures, Household equipment, Cotton

fabrics, Baby toys

Thailand 8

Natural rubber, Rice, Office machines, Meat, Fish, Radio

Broadcast receivers

Mexico 9

Transport motor, Railway and distributing electricity vehicles,

Television receivers, Meters, Vegetables, Metal ores and

concentrates

India 10

Rice, Vegetable textile fibers, Spices, Gems and Jewellery,

Synthetic Organic colouring matter, Crustaceans, Cotton,

Floor coverings, Textile yarn

Philippines 11Nickel ores, Photographic apparatus, Office machines, Wood

manufacture, Electrical machinery

Vietnam 12

Wood particles and waste, Rice, Fur skins, Natural rubber,

Spices, Footwear, Crustaceans, Coffee

Cambodia 13

Fur skins, Textile clothing, Footwear, Natural rubber,

Motorcycles and cycles

Low sophistication High sophistication

Source: MIT, UNComtrade, UNCTAD, ICICI Bank Research

(foreign value added is the value added of inputs that are imported in order to produce intermediate or final goods/services that are

exported to other countries). Source: UNCTAD 2011 data

12 Foreign Trade Policy Statement. 2017. Mid Term Review. Ministry of Commerce and Industry. Department of Commerce.

Government of India. http://indiantradeportal.in/uploads/Documents/FTP/FTPST-17-05122017.pdf

13 Highlights of the Foreign Trade Policy. 2015-2020. Mid Term Review (December 2017). Ministry of Commerce and Industry.

Department of Commerce. Government of India.

7

Malaysia 8

Thailand 20

Vietnam 26

Philippines 29

Cambodia 33

China 36

Mexico 43

India 54

GVC participation ranking

(out of 64 countries)

Source: UNCTAD, ICICI Bank Research

Box 1: Multilateral and Regional Trade Agreements

Asia Pacific Trade Agreement (Bangkok agreement)

Country: Bangladesh, India, Lao, China, Mongolia, South Korea, and Sri Lanka; Type: Multilateral

India-ASEAN Comprehensive Economic Cooperation Agreement

Country: India with ASEAN; Type: Multilateral

PTA between India and MERCOSUR

Country: MERCOSUR is a trading bloc in Latin America comprising Brazil, Argentina, Uruguay and Paraguay.

Type: Multilateral

Agreement On South Asia Free Trade Area (SAFTA) and Agreement On SAARC Preferential Trading Arrangement

(SAPTA)

Country: Bangladesh, Bhutan, Maldives, Nepal, Pakistan and Sri Lanka; Type: Multilateral

India’s current engagements in RTA include:

Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC) Free Trade

Agreement (FTA) negotiations

India-Gulf Cooperation Council (GCC) Free Trade Agreement (FTA) negotiations

India-South African Customs Union (SACU) Preferential Trade Agreement (PTA) negotiations

India-EU Broad Based Trade and Investment Agreement (BTIA) negotiations

Global System of Trade Preferences (GSTP)

Apart from these multilateral trade agreements, India has bilateral agreements with the following countries:

Afghanistan, Bhutan, Chile, Japan, Korea, Malaysia, Nepal, Singapore, Sri Lanka, Thailand and the India Africa trade

agreement (which includes bilateral agreements with 19 countries of the African continent).

Moreover, India is partnered with the following countries through Comprehensive Economic Cooperation

Agreement (CECA) – Thailand, New Zealand, Canada, Australia, Indonesia

Source: 1) http://www.indiantradeportal.in/index.jsp 2) Ministry of Commerce and Industry

In this context, the next section looks at India’s trade profile, in terms of its top net exports and net import products

and partners, and how these products have been performing in global trade to assess areas of policy support to help

export growth.

Section 4: India’s trade profile and policy suggestions

India’s total trade in goods in calendar year 2018 was to the tune of ~USD 850 bn, comprising ~USD 518 bn in

imports and ~USD 332 bn in exports, making the country a net importer. Our trade deficit in 2018 was ~USD 187 bn,

with highest trade deficit with China, Saudi Arabia, Iraq, Switzerland and Iran respectively. On the other hand, top 5

countries with which India has a trade surplus include: USA, Bangladesh, Nepal, Netherlands and Sri Lanka. Following

the SITC Revision 3 goods classification, we look at India’s top 5 imports and exports in 2018. While our top 5 net

imports comprise: crude oil, gold, coal, part for office machines and natural gas, our top 5 net exports are: petroleum

products, medicaments, jewellery (gold, silverware, jewellery), rice, passenger motor vehicles.

8

India’s exports dominated by labour intensive products - Following are the key highlights of India’s exports:

Top 10 products by net exports are dominated by labour intensive products – jewellery, rice, textile, crustaceans.

These are the products that India has a high Revealed Comparative Advantage and in our view should be

supported by policy thrust.

Interestingly, despite being a net exporter, RCA of motor vehicles is less than 1, indicating the competition in this

product group globally.

Moreover, India’s export concentration of the top 10 products and partners is ~30%. This indicates that we have a

diverse export basket both in terms of products and partners. This bodes well as it reduces India’s export

dependency on a particular country (other than USA) or product group (other than petroleum products)

Moreover, inspired by the research done by MIT we have also created India’s export mapping which gives a pictorial

representation of India’s export basket. The mapping also shows our dominance in primary goods and products

involving lower technological know-how and processes.14

India’s imports difficult to substitute – Key highlights of India’s imports include:

India’s top products by net imports include crude oil, gold, coal, telecom equipment. Most of these products are

primary/resource based goods, which would be difficult to produce domestically, hence increasing our import

dependency.

Interestingly, despite having a high RCA in pearls and precious stones, India is a net importer, with falling rate of

growth between 2012-2017 as compared to 2007-2012

Telecom equipment parts would require economic and knowledge synergies to reduce import reliance.

India’s top partners by net imports include resource rich countries and countries with export sophistication.

India’s import concentration of the top 10 products and partners is much higher than our exports, once again

displaying lower substitutability of our imports.

Sector specific policy support to aid export performance – Given the dynamics of India’s trade, we now look at its

export performance. During the period 2002 to 2017, India’s 5 year CAGR of export growth has declined to 0.4%, while

its share of exports to global exports has risen marginally to 1.7%. Gems and Jewellery sector has seen a fall in both

growth and world trade share; while crustaceans has seen improvement. CAGR growth of rice and textile yarn are also

a concern. Policy support for these groups, in particular agriculture and labour intensive products would help boost

both growth and employment opportunities. In this regard, the Foreign Trade Policy (2015-2020) enlists export

promotion and incentives (details in Box 2) for MSMEs, labour intensive industries, agricultural programs through

easing trade across borders, export incentives to notified industries, building of technology parks and industrial

clusters, and mentoring and training new exporters and these are steps in the right direction. These in our view,

would be easier to implement and through concentrated action and implementation would alleviate some of the

distress that the export sector is currently facing, leading to higher domestic growth and employment creation. This

especially holds significance given the current global environment.

2007 2012 2017 2007 2012 2017

Al l products 30.6 18.7 0.4 1.1 1.6 1.7 294.4

Petro leum products 80.1 23.3 -9.9 4.3 5.4 5.8 34.8 3.2

Medicaments 32.6 25.9 7.6 1.3 2.7 3.4 12.0 2.0

Jewel lery 38.3 39.3 -9.8 9.0 13.8 11.3 13.1 6.5

Rice 19.1 27.0 3.7 17.8 25.4 37.7 7.1 16.8

Passenger motor vehic les 70.7 34.8 11.7 0.2 0.7 0.9 6.6 0.5

Texti le apparel 21.2 12.2 11.5 2.1 3.0 4.6 6.2 2.4

Crustaceans 1.7 19.7 23.5 5.3 7.8 17.0 5.4 9.2

Texti le yarn 14.3 15.4 0.8 6.4 9.9 11.2 5.5 6.2

Export performance of top products by net exports

5 year CAGR growth (%) % share to the worldValue o f

exports 2017

(USD Bn)

RCA 2017

Source: MIT, UNComtrade, UNCTAD, ICICI Bank Research

14 Refer to page 2

9

Box 2: Current policies to support Exports

Repositioning Export Strategy: Revised foreign trade policy will focus on expanding trade by easing trade across

borders, tapping new markets, monitoring export performance as well as leveraging GST benefits. To increase

employment opportunities and farmer’s income, there will be an increase in exports from labor intensive sector, MSMEs

and agricultural sector. Aim is to increase India’s share in traditional markets and enhancing participation in Global Value

Chains.

Encouraging exports by MSMEs and labour intensive industries through (MEIS) Merchandise Exports from India

Scheme and Service Exports from India Scheme (SEIS) incentives: MEIS is a major export promotion scheme through

export incentives of notified goods to notified markets covering in particular the textile industry and other MSME and

labour intensive industries. Similarly, SEIS covers eligible services including business, legal, accounting etc.

Focus on Agricultural exports to increase farmers’ income: Focus of New Agricultural Policy is to expand exports of

agricultural value added products via stable and open export policy, effectively handling of sanitary and phytosanitary

standards (SPS) and technical barriers to trade (TBT) issue in domestic and international markets, creating logistic

facilities from farm to ports and airports and setting up credible and up to date organic export certification and

accreditation programmers alongside appropriate policy interventions.

Trade Infrastructure for Export Scheme (TIES): Aim is to enhance export competitiveness and by building infrastructure,

first mile and last mile connectivity while addressing quality and certification measures.

Market Access Initiative (MAI) Schemes: To promote export by evolving specific markets and products through market

surveys/studies.

Special Economic Zones (SEZ): Supply of goods and services to SEZ to be treated as zero rated under GST as to get the

benefit of tax refund on the pattern of exports. Earlier refund was state dependent.

Duty Exemption and Remission Schemes including Advance Authorization scheme, Duty Free Import Authorization

(DFIA) scheme, Duty Drawback of Customs/Central Excise Duties/Service Tax, Interest Equalisation Scheme (IES).

Towns of Export Excellence (TEE): With the aim to develop and promote industrial clusters “selected towns producing

goods of INR 7.5 bn or more are notified as TEE on potential for growth in exports and provide financial assistance

under Market Access Initiative (MAI) Scheme to recognized Associations”.

Niryat Bandhu - Hand Holding Scheme for new export/ import entrepreneurs: aimed at mentoring, training new

exporters undertaken by the DGFT. Identifying export clusters to promote MSME through focused intervention.

Export of perishable agricultural Products: “To reduce transaction and handling costs, a single window system to

facilitate export of perishable agricultural produce has been introduced.”

Export oriented units (EOUs), Electronics hardware technology parks (EHTPs), Software Technology parks (STPs) and

Bio-technology parks (BTPS): In order to promote exports, increase investment and improve foreign exchange

revenues, units undertaking to export their entire production can avail of these schemes.

Other schemes include the EPCG scheme for capital goods imports and status holder scheme that rates exporters

through performance and further incentivizes them through non-fiscal privileges.

Source: 1) Highlights of the foreign trade policy 2015-2020. Mid-term Review (December 2017). 2) Foreign Trade Policy (2015-20)

Updated trade policy as on June 2019 3) http://www.indiantradeportal.in/index.jsp

*Text in quotes has been picked up directly from the source

10

Appendix 1

Reg OLS India Export with INR REER and World Exports

Dependent Variable: India Export Growth

Method: Least Squares

Sample (adjusted): 1994 2018

Included observations: 25 after adjustments

Variable Coefficient Std. Error t-Statistic Prob.

India REER Growth 0.227118 0.276336 0.821889 0.4196

World Exports Growth 1.126648*** 0.103532 10.88211 0

R-squared 0.804865 Mean dependent var

Adjusted R-squared 0.796381 S.D. dependent var

S.E. of regression 5.67557 Akaike info criterion

Sum squared resid 740.8783 Schwarz criterion

Log likelihood -77.83547 Hannan-Quinn criter.

Durbin-Watson stat 1.815772

6.943638

12.57767

6.386838

6.484348

6.413883

Source: E-views, CEIC, Bloomberg, ICICI Bank Research

*** significant at 1% level

India Export Growth YoY deflated by India Wholesale Price Index (base 2011-12)

36 country export weighted INR REER Growth (base 2011-12)

World Export Growth YoY deflated by US Consumer Price Index (base 1991)

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