The Indian government last week published its Foreign Trade Policy (FTP) for 2015-2020. The most significant target that has been set is to almost double exports of goods and services to US$900bn in FY20/21 (the fiscal year to March 2021) from an estimated US$470bn in FY14/15.
In the process, the government aims to raise India's share of world exports to 3.5% by 2020, from just under 2% last year. A number of initiatives have been outlined to achieve these goals, including moves to diversify India's export base, enter into free trade agreements with some of the world's major regions and, in the near term, prevent rapid appreciation of the real exchange rate.
The new targets are highly ambitious. To meet its goals, export revenues would need to increase by around 15% y/y to FY20/21. This is significantly higher than export growth of around 4% y/y since 2012. Previous targets have been missed too - the preceding FTP target for FY14/15 was missed by nearly 35%.
"The ambitious plans to almost double Indian exports by 2020 from current levels are no bad thing, but in truth the targets look unrealistic. Reforms that would significantly boost export prospects, such as loosening labour laws and easing land acquisition, have not been forthcoming in Prime Minister Modi's first year in office. Unless this changes, exports look set to remain a weak spot", says Capital Economics.
