India's $2 Trillion Exports Target 'Daunting' In Face Of US, EU Trade Policies, Says DGFT

India's required 14.4% annual growth in exports to achieve the $2 trillion target by 2030 looks "daunting", especially with major partners such as the US and EU adopting aggressive trade policies, according to a senior government official.

Addressing a webinar, Santosh Sarangi, head of the Directorate General of Foreign Trade, said the high import tariffs, alongside non-tariff measures such as the US' Inflation Reduction Act and CHIPS Act, the UK's Advanced Manufacturing Plan and the EU's Green Deal, will impact the growth of India's exports. This is because such programs by advanced nations will narrow the export window.

Further, the lack of domestic manufacturing competitiveness, insufficient global value chain integration and technological disadvantages are also emerging as major strategic differentiators in growing exports.

In terms of costs, India's logistics costs stand at about 8.9% of GDP, against 5-6% in developed economies, which are a detriment for industries wanting to set up in India. Insufficient credit coverage for exporters is also an impediment to achieving the $2-trillion target, with export credit as a percentage of total merchandise export only at 28%.

"A total export credit requirement of $650 billion is needed for 2030, when $1 trillion in merchandise exports will have been touched," Sarangi said.

The demand for collateral, high interest rates, lack of an integrated framework for trade finance and no scheme for remission of duties for service exports is also hurting exporters.