Recasting India’s Export Competitiveness: A Structural Redress, Not a Cosmetic Fix
India’s sluggish export growth—amid the government’s ambitious claim of hitting a $2 trillion export target by 2030—stems less from global headwinds, and more from structural inefficiencies in domestic policy design. The recent Budget 2026 announcement of enhanced incentives for export hubs misses the deeper issue: India’s export ecosystem suffers from fragmented governance, suboptimal trade facilitation, and incoherent industrial policy. Without addressing the systemic lacunae, any carrots offered to exporters are bound to yield diminishing returns.
Institutional Landscape: Structural Flaws in the Governance Framework
India's export framework hinges on policies under the Foreign Trade Policy (FTP) and is backed by institutions like the Directorate General of Foreign Trade (DGFT). Budget 2026 allocated Rs. 5,000 crore to enhance trade infrastructure in special economic zones (SEZs), but the SEZ policy itself remains outdated. The Sunil Mehta Committee's 2025 report flagged regulatory bottlenecks in the SEZs, noting only 60% operational efficiency due to non-conformity with WTO norms and state-level legal inconsistencies.
The Export Promotion Councils (EPCs), created to foster sector-specific competitiveness, have largely failed to provide actionable market intelligence, with a CAG report (2024) highlighting under-utilization of allocated resources. Moreover, India’s logistics performance index (ranked 38th in the World Bank 2023 study) underscores a serious infrastructure gap, with inland freight costs exceeding global benchmarks by 30-40%. These disconnected threads are emblematic of India’s wider institutional malaise.
Argument: Why the Incentive-Led Model is Misguided
The government’s argument for export incentives assumes that fiscal carrots can offset the systemic inefficiencies plaguing exporters. For instance, under the Remission of Duties and Taxes on Export Products (RoDTEP) scheme, Rs. 40,000 crore was allocated for remission of embedded taxes in exports in FY2025-26. While this scheme provides minor relief, it fails to address the root issue of inefficient compliance regimes and India’s struggle to meet WTO subsidy norms. The challenge remains one of weak structural support rather than fleeting fiscal measures.
Adding evidence to this, the NSSO’s 2025 survey on micro-exporting units flagged bureaucratic hurdles as a major roadblock to scaling operations. Nearly 78% of surveyed units reported delays in acquiring export clearances, eroding time-sensitive global competitiveness. Further, India’s stance on free trade agreements (FTAs) has been lackluster, with the UK-India FTA negotiations stalled since February 2026 over unresolved rules-of-origin clauses.
Contrast these inefficiencies with Vietnam, whose Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) membership, coupled with streamlined trade facilitation processes, has positioned it as a rising export giant. Vietnam’s exports grew nearly 12% year-on-year in 2025, while India’s bounced by a mere 3%. What Vietnam achieves through integrated governance structures and robust legal frameworks, India tries to buy with fiscal sops—an unsustainable strategy.
Critique: Failure of Policy Coordination and Accountability
A critical institutional flaw lies in the fragmented nature of India’s export governance. While the DGFT formulates FTP policies, state government agencies and customs authorities operate as siloed entities with conflicting priorities. The 2024 NITI Aayog study revealed that only 7 Indian states actively integrate state-level industrial policies with national FTP goals. Exporters located in states without coherent alignment fail to benefit from policy synergies, and this geographic inequity deepens economic asymmetry.
The judiciary, too, has flagged gaps in trade facilitation. The Supreme Court’s judgment in ‘Export Promotion vs Union of India, March 2023’, struck down inconsistent interpretations of export incentives under GST refund mechanisms. However, the absence of timely legislative clarity post-verdict further muddles exporters’ operational predictability. This judicial activism represents a stopgap solution to policy inertia, but it cannot be the cornerstone of systemic reform.
Counter-Narrative: Are Global Headwinds the Main Culprit?
The strongest argument opposing India’s lackluster export performance points to external factors: weakening global demand, geopolitical shifts, and supply chain constraints. The slowdown in global merchandise trade volumes to 4.6% in 2025 (as per WTO data) creates unfavorable conditions for emerging economies like India to sustain export momentum. Moreover, the Russia-Ukraine conflict has distorted global commodity prices, creating instability in India’s critical export sectors like engineering goods and textiles.
While these factors are indisputable, they are insufficient to explain India’s export underperformance relative to peers. Vietnam, Indonesia, and Bangladesh, operating under similar external constraints, have leveraged efficient domestic policies to offset global volatility. India’s problem lies not in external forces beyond its control, but in overreliance on short-term interventions rather than structural fixes.
International Perspective: Vietnam’s Policy Innovation
Vietnam presents a sharp contrast to India’s policy approach. Its ‘National Export Strategy 2025’ integrates tax incentives with robust logistics infrastructure, including transparent customs procedures and reduced non-tariff barriers. Vietnam’s export processing zones maintain WTO-compliance while leveraging trade agreements—like CPTPP and EVFTA—to expand market access. Where India’s SEZs struggle with outdated legal frameworks, Vietnam’s export zones contribute nearly 40% of its annual trade revenue. India must recalibrate its focus from fiscal incentives to legal and infrastructural revamps that empower exporters to compete globally.
Assessment: Reform Directions for Export Competitiveness
India’s export competitiveness needs a structural shift. Policymakers must prioritize regulatory efficiency, coherence between state and national policies, and infrastructural modernization over reliance on fiscal sops. Unifying state-level industrial priorities with FTP objectives through central guidelines, coupled with EPC accountability reforms, would create a consolidated governance ecosystem. Additionally, greater engagement in FTAs—especially with the EU and ASEAN—must complement domestic reforms.
Realistically, short-term steps like RoDTEP must continue to cushion exporters, but they can only be interim solutions. Long-term competitiveness demands addressing institutional failures and strategic engagement with global markets via sustainable policy designs.
- Question 1: Which of the following indexes measures global trade logistics efficiency?
A. Human Development Index
B. Global Competitiveness Index
C. Logistics Performance Index
D. Ease of Doing Business Index Answer: C. Logistics Performance Index
- Question 2: The Remission of Duties and Taxes on Export Products (RoDTEP) scheme was launched to:
A. Provide direct subsidies to exporters
B. Offset embedded taxes and duties on exported goods
C. Fund infrastructural development in SEZs
D. Provide market intelligence to exporters Answer: B. Offset embedded taxes and duties on exported goods
Practice Questions for UPSC
Prelims Practice Questions
- Infrastructure-focused incentives can raise export performance even if compliance regimes and institutional coordination remain weak.
- An incentive scheme that remits embedded taxes may offer relief but cannot substitute for reforms in trade facilitation and governance.
- Fragmented governance across national and sub-national agencies can reduce exporters’ operational predictability and policy benefits.
Which of the above statements is/are correct?
- SEZ performance is affected by regulatory bottlenecks, including state-level legal inconsistencies and issues related to WTO norms.
- Export Promotion Councils are portrayed as effectively providing actionable market intelligence, as evidenced by high utilization of allocated resources.
- Judicial interventions can correct policy inconsistency, but without timely legislative clarity they may not ensure stable operating rules for exporters.
Which of the above statements is/are correct?
Frequently Asked Questions
Why does the article argue that India’s sluggish export growth is primarily a domestic structural issue rather than a global cyclical one?
It attributes weak export performance to fragmented governance, weak trade facilitation, and incoherent industrial policy, which incentives cannot compensate for. External headwinds exist, but the article suggests they do not fully explain the persistence of compliance delays, logistics gaps, and policy misalignment across institutions.
How do governance fragmentation and lack of coordination weaken India’s export ecosystem according to the article?
The DGFT’s national policy framework operates alongside state agencies and customs that function in silos with conflicting priorities, reducing predictability for exporters. The NITI Aayog finding that only a small number of states align industrial policy with national FTP goals implies uneven benefits and deeper regional inequities.
What institutional and regulatory problems in SEZs are highlighted, and why do they matter for export competitiveness?
Budgetary allocation for SEZ trade infrastructure is noted, but the SEZ policy is described as outdated and constrained by regulatory bottlenecks. The Sunil Mehta Committee flagged WTO-norm non-conformity and state-level legal inconsistencies, which depress operational efficiency and raise transaction costs for exporters.
Why is the incentive-led approach (e.g., RoDTEP) considered insufficient in the article’s argument?
RoDTEP offers remission of embedded taxes and some relief, but the article contends it does not fix inefficient compliance regimes or broader struggles with WTO subsidy norms. Without systemic reforms in facilitation and governance, fiscal sops deliver diminishing returns and cannot sustain competitiveness.
What does the article suggest about trade facilitation, legal clarity, and their impact on exporter predictability?
Bureaucratic hurdles, including clearance delays reported by micro-exporting units, directly erode time-sensitive competitiveness. The Supreme Court striking down inconsistent GST refund interpretations is presented as a stopgap, but the absence of timely legislative clarity continues to create uncertainty for exporters.
About LearnPro Editorial Standards
LearnPro editorial content is researched and reviewed by subject matter experts with backgrounds in civil services preparation. Our articles draw from official government sources, NCERT textbooks, standard reference materials, and reputed publications including The Hindu, Indian Express, and PIB.
Content is regularly updated to reflect the latest syllabus changes, exam patterns, and current developments. For corrections or feedback, contact us at admin@learnpro.in.