Enhance export preparedness of States/UTs

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

EPI 2021 entails 4 pillars, 11 sub-pillars and 60 indicators and covers across 28 states and 8 UTs. As per 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 'Himalayan States' and 'Union Territories,' Uttarakhand and Delhi are the top-performing states respectively.

The framework consists of four main dimensions: Policy, Business Ecosystem, Export Ecosystem and Export Performance.

The existence of a favourable trade policy in a region forms the basis for the strategic advantage to the stakeholders and provide a vision of the state government. The pillar covers the paramount trade policies vital for the expansion of export business. It evaluates whether the particular policy has been implemented in the state or not.

A conducive eco-system with regulatory ease and a facilitative environment spurs business activity. This pillar tries to capture the performance of the states on similar grounds. The existence of efficient business ecosystem strengthens the backward and forward linkages of the exporting industry, thereby enhancing their output and growth. It covers a wide range of areas like Ease of Doing Business, Innovative Capacity, Cluster strength, Financial Ability, Logistics and more.

In addition to the comprehensive enabling environment in the state, special attention must be given to the export business ecosystem, which drives competition and growth in the export-specific sector. The pillar covers indicators like area under 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 the existing ones.

Measuring export performance is necessary to assess actual results. This particular pillar, unlike others, is an output-based dimension. It helps to examine how much the states have achieved and improved in the export sector. Growth and diversification of exports constitute the export performance of the states.

All the vital parameters, namely Export Promotion Policy, Institutional Framework, Business Environment, Infrastructure, Transport Connectivity, Access to finance, Export Infrastructure, Trade Support, Research and Development Infrastructure, Growth Orientation and Export Diversification have been covered as sub pillars under the four main dimensions of the index. The sub-pillars cover sixty indicators in total.

There is a high scoring range amongst Indian states on the EPI, where Gujarat has the highest score of 78.86 and Lakshadweep with the lowest score of 2.12. Gujarat has topped the index with a strong display in various sub-pillars such as Export promotion policy, Business Environment and Infrastructure. Notably, other coastal states such as Maharashtra and Karnataka occupy the index's second and third positions.

All three states have performed consistently across pillars, thus consolidating solid scores. These states are among the top states in the export contribution of more than 50 per cent in India in 2020-21. The best performing states in EPI have also been some of the top scorers in the innovation and LEADS index, which reflects the role of increasing innovative capacity and logistical infrastructure in shaping export growth. Moreover, these states have struck a balance in existing basic and export infrastructure, driving the export growth in the regions. An additional advantage to these states is that they enjoy the strong presence of industries that drive investment and FDI inflows, further enhancing manufacturing tendencies in the region. Every region needs to strike this balance between overall competitiveness, innovation and export performance like Gujarat and Maharashtra.

From landlocked states, it is Haryana that emerges as a top performer. Except for trade support and export growth and orientation, the state has performed tremendously well across all pillars and sub-pillars. Bihar and Chhattisgarh are some of the weaker states in this category. They need to improve their performance under the business ecosystem. A policy measure is not enough to foster export business and export growth in a region. Even though Bihar has necessary policy measures, it does not have adequate infrastructure to facilitate an enabling export environment.

Amongst Himalayan states and city-states, Uttarakhand and Delhi are the top-performing states. Delhi performs well on EPI due to higher FDI inflows, better transport connectivity, logistics and investment attracted because it is the national capital. Delhi's satisfactory performance on the innovation index has also driven its score in the business environment sub pillar. On the other hand, Uttarakhand has attracted significant investments over the last three years. It has brought initiatives such as single-window clearances, a loan scheme for exporters, a trade guide and further improved export market penetration.

Odisha is ranked 13 with export preparedness score of 42.04. In Coastal State Category, Odisha is ranked 6. Odisha has declined from rank 5 in 2020 Index to rank 13. Export preparedness score has declined from 58.23 to 42.04. In Coastal State Category, Odisha has declined from rank 4 to rank 6. Odisha has scored best in Policy Pillar while score is lowest in Business Ecosystem. In sub-pillars, Odisha has 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 policymakers and exporters to identify the drivers and obstacles and examine the same to strategize a viable export map for the state.