Improve State/TU Export Readiness

NITI Aayog has launched the second edition of the Export Readiness Index (EPI). The IPS aims to examine the export performance and export readiness of states and union territories.

The 2021 IPS includes 4 pillars, 11 sub-pillars and 60 indicators and covers 28 states and 8 UTs. According to the index, Gujarat emerged as the top performing state in the “coastal states” category, followed by Maharashtra and Karnataka. In the category of “landlocked states”, Haryana was the best performing state. Among the “Himalayan States” and “Union Territories”, Uttarakhand and Delhi are the best performing states respectively.

The framework consists of four main dimensions: policy, trade ecosystem, export ecosystem, and export performance.

The existence of a favorable trade policy in a region forms the basis of strategic advantage for stakeholders and provides insight into the state government. The pillar covers overriding trade policies vital for the expansion of export activities. It assesses whether the particular policy has been implemented in the state or not.

A conducive ecosystem with regulatory ease and an enabling environment drives business activity. This pillar attempts to capture the performance of States on similar bases. The existence of an effective trade ecosystem strengthens the backward and forward linkages of the export industry, thereby enhancing its production and growth. It covers a wide range of areas such as ease of doing business, innovation capacity, cluster strength, financial capacity, logistics and more.

In addition to the overall favorable environment in the state, special attention should be paid to the export business ecosystem, which drives competition and growth in the export-specific sector. The pillar covers indicators such as area of ​​export promotion industrial parks, export promotion zones, existence of trade guide, number of inspection agencies – NABCB certification and others, which are essential to attract new investors and increase the productivity of existing ones.

Export performance measurement is necessary to gauge actual results. This particular pillar, unlike others, is an outcome-based dimension. It allows reviewing the achievements and improvements of states in the export sector. Export growth and diversification constitute the export performance of states.

All the essential parameters, namely export promotion policy, institutional framework, business environment, infrastructure, transport connectivity, access to finance, export infrastructure, trade support, research and development infrastructure, growth direction and export diversification were covered as sub-pillars of the four main dimensions of the index. The sub-pillars cover around sixty indicators in total.

There is a high scoring range among Indian states on the PPE, where Gujarat has the highest score of 78.86 and Lakshadweep with the lowest score of 2.12. Gujarat tops the index with strong performance in various sub-pillars such as export promotion policy, business environment and infrastructure. Notably, other coastal states such as Maharashtra and Karnataka occupy the second and third positions in the index.

All three states achieved consistent performance across all pillars, consolidating strong scores. These states are among the top states in export contribution of more than 50% in India in 2020-21. Top performing states on the EPI are also among the top scores on the Innovation Index and LEADS, which reflects the role of increased innovation capacity and logistical infrastructure in shaping the export growth. Additionally, these states have struck a balance between existing basic and export infrastructure, driving export growth in the regions. An added advantage for these states is that they benefit from the strong presence of industries that drive investment and FDI inflows, which further strengthens manufacturing trends in the region. Each region must find this balance between global competitiveness, innovation and export performance like Gujarat and Maharashtra.

Of the landlocked states, Haryana stands out as the best performer. With the exception of trade support and export growth and orientation, the state has performed strongly in all pillars and sub-pillars. Bihar and Chhattisgarh are among the weakest states in this category. They need to improve their performance as part of the business ecosystem. A policy measure is not enough to stimulate export activities and export growth in a region. Even though Bihar has the necessary policy measures, it lacks adequate infrastructure to facilitate a favorable export environment.

Among the Himalayan states and city-states, Uttarakhand and Delhi are the best performing states. Delhi scores well on the EPI due to higher FDI inflows, better transport connectivity, logistics and investment attracted as it is the national capital. Delhi’s satisfactory performance on the innovation index has also boosted its score in the business environment sub-pillar. On the other hand, Uttarakhand has attracted significant investment over the past three years. It has brought initiatives such as one-stop customs clearance, a loan program for exporters, a trade guide and better penetration of export markets.

Odisha is ranked 13th with an export readiness score of 42.04. In the category of coastal states, Odisha is ranked 6. Odisha has moved from rank 5 in the 2020 index to rank 13. The export readiness score has fallen from 58.23 to 42.04. In the category of coastal states, Odisha moved from rank 4 to rank 6. Odisha scored the highest in the political pillar while the score is lowest in the business ecosystem. In the sub-pillars, Odisha scored 100 in Export Promotion Policy, 59.32 in Institutional Framework, 62.35 in Business Environment, 14.59 in Infrastructure, 35.83 in Transport Connectivity, 35.17 in access to finance, 38.72 in export infrastructure, 1.04 in trade support, 12.33 in R&D infrastructure, 31.64 in growth and orientation and 29.63 in export diversification.

The idea behind the index is to create a benchmark to rank these states and UTs to help them individually promote a conducive export environment in the region. The index is an essential tool for policy makers and exporters to identify drivers and barriers and examine them to develop a viable export strategy for the state.

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