A complete brief about how India’s exports crossed $100 billion in a quarter. The Indian economy is going through a crucial phase with the World Bank predicting 7.3% growth in 2016-17, and it will be interesting to see what can make exports cross $200 billion mark. Let’s explore what could be the major contributing factor to this rise!
India’s Secret to Success: Focus on Less
India has an unprecedented demographic dividend with its population of 1.2 billion people and 60% of people under age 25. How they use this is important because most countries with similar demographics have suffered from low growth rates.
How is it that India has managed to do so well? The answer lies in how India focuses on a select few industries instead of mass producing products. This is evident from the fact that India’s IT outsourcing services industry has proven to be successful for two decades now.
India’s Successful Recoveries after Downturns
The Indian economy is known to recover quickly after downturns, and this shows up in their exports as well. The 2008 recession impacted India less than other countries because they were so focused on outsourcing, which only slowed down temporarily before picking up soon after. During the 2009 global recession, India’s GDP grew by 6%.
Some low points for the Indian economy are worth noting even though it continued to remain stable:
- 2012: The rupee fell 20% against U.S. dollar
- 2013: GDP growth slowed to 4.5%
- 2016: India’s stock markets had their worst week in over two years, but the economy survived without a major dent
Economic Reforms That Made a Difference
The reforms that have made business easier are listed below. These are some of the key reasons for which India has been successful at exporting across the world.
Goods and Services Tax (GST)
It will make it easier to do business by streamlining indirect taxes throughout India’s states. The bill was passed in August 2017 after getting support from all political parties, which is an indicator of how beneficial this move can be for Indian exporters. This tax reform will take place on July 1st, 2017. According to the World Bank, this reform alone can boost India’s GDP by 2%.
In November 2016, the government took 100 and 500 rupee notes out of circulation and replaced them with new 500 and 2000 rupee notes with various security features to prevent counterfeiting.
While there were some disruptions initially due to liquidity constraints, it is believed that this move will have positive long term effects on black money which had been stashed as cash instead of being put into the financial system all these years. This would be a long time coming for proper taxation of income.
GST levy of 0.1%
The GST Council has agreed to levy a 0.1% additional tax for all exports which will help generate funds that can be used for development of infrastructure and logistics in the long run. The government will also not be charging any tax on exports which are below Rs. 2000, which is a massive relief to small and medium enterprises.
How to focus on India’s exports
India has shown what it can achieve with the right focus and support from the country’s leadership and policymakers. It remains to be seen what new export records India sets next year, 2020. All the best! Kudos to all Indian exporters who have managed to increase their exports despite various challenges such as demonetization and GST implementation!
The Indian economy is known as one that shows unparalleled resilience through various economic crisis’ such as those in 2008, 2009, and 2016. In fact, the economy has shown a consistent growth throughout these years. India’s economy is performing well, and this is evident from the country’s exports as well.