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Lack of Quality, Competitive Production Hurting Exports: NITI Aayog

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The ‘Three Year Action Agenda 2017-20’ of the NITI Aayog has viewed that lack of competitive products and low productivity growth are two major factors which have been hindering the Indian export sector.

Finance Minister Arun Jaitley unveiled the government think-tank’s Action Agenda.

“On the demand side, Indian firms often complain that there is inadequate demand for their products. Yet, the world market in merchandise exports at USD 16.6 trillion in 2015 is extremely large. Why are Indian firms not able to take advantage of this massive demand? The likely explanation is that their products are not competitive in the global economy,” the report said.

It added that the discipline of the global economy is what leads to fast productivity growth.

“Exporters must compete against the best in the world and must therefore constantly upgrade technology, management and product quality to remain competitive,” the Action Agenda said.

Pointing out how Indian export firms are lagging in terms of economies of scale, the report said, “Many super-competitive firms operating in China today employ not just tens of thousands of workers but hundreds of thousands of them …. there are hardly any firms in India employing hundreds of thousands of workers.”

Citing an example, it added that more than 90% of apparel workers in India were employed in firms with less than 50 workers in 2005. The corresponding figure in China was less than 15% the same year.

Emphasizing on the potential of the export sector in job creation, the report said, “Exporting firms must maintain high productivity, which translates in high wages for their employees.”

Elaborating the point further the three year vision document said Non-exporting firms either become ancillaries of the exporting firms or must compete against them in the domestic market. In either case, they must achieve high productivity to survive, which allows them to pay competitive wages.

“Recognizing this critical role of exports in the creation of well-paying jobs, India needs a focused strategy for creating an environment in which export competitive firms can emerge, especially in labour intensive sectors,” the report said.

The ‘Three Year Action Agenda’ is an integral part of the 15-year Vision Document of India being drafted by the NITI Aayog.

Releasing the report, Finance Minister Arun Jaitley said that Indians’ expectations of increasingly higher economic growth is putting pressure on the political class, resulting in easier, expeditious decision-making at both the central and state levels.

“Indians are increasingly becoming restless and expect higher growth rates and higher levels of activity to happen,” he said.

Nowadays, there are not too many decisions that one will find stuck in the pipeline because it is not comfortable or politically expedient to take that decision,” he added.

Jaitley said that the expectations of India’s “aspirational class” was equally putting pressure on state governments.

“Across the country, states are positioning themselves as to who can better the others in ease of doing business…they are competing to attract investment,” he said.

In this connection, the Finance Minister said that the Niti Aayog’s Action Agenda recommending policy changes and action programmes for the next three years “has the potential to be a good text book for those in governance.”

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