The think tank said that among the key reasons for weak exports in these sectors are non-tariff barriers (NTBs) imposed by consumer nations and that India should use the ongoing free trade agreements negotiations to eliminate such barriers. NTBs are trade restrictions in the form of regulations or quotas designed to limit imports without the explicit use of tariffs.

At a time when India is signing free trade agreements with developed nations such as the UK, GTRI said that mere signing of an FTA may not result in a rise in India’s labour-intensive Goods exports and India’s export of apparel to Japan is an example.
“Most-favored nation (MFN) duties on Apparel in Japan are 10 per cent.

During the FTA negotiations in 2008-2010, it was thought that if Japan could reduce duties to zero post-FTA, India’s apparel exports to Japan would get a significant boost. Both countries agreed to eliminate duties on all apparel from day one of the entry into force of the India –Japan FTA. But data from the past 12 years show that the expected gains did not happen,” GTRI said.
“Competition from more efficient suppliers from China, Vietnam, or Bangladesh could be a reason. Developed countries with high per capita income prefer high-fashion branded apparel produced in large units. While developed countries buy 70 per cent of apparel from mixed synthetics, their share in India’s exports is less than 40 per cent. On average, India’s labor-intensive manufacturing units employ 20 workers compared to 1,000 in China,” it added.

Earlier this year, Federation of Indian Export Organisations (FIEO) had also said that an analysis of sector-wise export performance for the last five years revealed the troubling pattern that India is experiencing a decline in global market share across labour-intensive sectors.

FIEO said that India’s export growth during the last few years can largely be attributed to a rerouting of crude oil trade routes via India to Europe and that “this phenomenon may not be sustainable in the coming years.