NITI Aayog's Export Preparedness Index 2020: Here's everything you need to know

On August 26, 2020, Government think-tank NITI Aayog released the Export Preparedness Index (EPI) 2020. The index is first of its kind in collaboration with the Institute of Competitiveness to examine export preparedness and performance of Indian states, identifying challenges and opportunities.

Rajiv Kumar, the Vice-Chairman of NITI Aayog said that the exports are an integral part of Aatmanirbhar Bharat and India will have to continue to strive to increase the share of exports in GDP and world trade. He further stated that the government will try to double India's share in the world trade in the coming years. 

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What does the report say?

1- As per the report, Gujarat has topped the NITI Aayog's Export Preparedness Index 2020 followed by Maharashtra and Tamil Nadu securing the second and the third place respectively. The newly created Union Territory of Jammu and Kashmir is at the bottom of the list. 

2- Among the landlocked states, Rajasthan tops the list followed by Telangana and Haryana while Bihar emerged as the weaker state.

3- Among the Himalayan states, Uttarakhand tops the index followed by Tripura and Himachal Pradesh. 

4- Delhi gained the tag of best Union Territory followed by Goa and Chandigarh. 

Goal of EPI

The primary goal of the EPI is to inculcate competition among all states in India in order to:
1- Bring favourable export promotion policies,
2- Ease regulatory framework to prompt subnational promotion of exports
3- Create a necessary infrastructure for exports
4- Help in identifying strategic recommendations for improving export competitiveness.

Index Calculation Steps

1- Indicator Selection and Data Collection
2- Dealing with missing values
3- Data Transformation
4- Aggregation

Category wise Export Preparedness Score and Rankings

Coastal States

Himalayan States

Landlocked States

Union Territories

Structure of EPI

The structure of the EPI includes 4 pillars and 11 sub-pillars. These are as follows: 

4 Pillars of EPI are:

1- Policy- It constitutes 20% and includes Export Promotion Policy (10%) and Institutional Framework (10%).
2- Business Ecosystem-  It constitutes 40% and includes Business Environment (10%), Infrastructure (10%), Transport Connectivity (10%) and Access to Finance (10%). 
3- Export Ecosystem- It constitutes 20% and includes Export Infrastructure (10%), Trade Support (5%) and  R&D Infrastructure (5%). 
4- Export Performance- It constitutes 20% and includes Growth and Orientation (10%) and Export Diversification (10%). 

11 Sub-pillars of EPI are:

1- Export Promotion Policy
2- Institutional Framework
3- Business Environment
4- Infrastructure
5- Transport Connectivity
6- Access to Finance 
7- Export Infrastructure
8- Trade Support
9- R&D Infrastructure 
10- Export Diversification
11- Growth and Orientation.

Key Challenges

1- Intra- and inter-regional disparities in export infrastructure
2- Poor trade support and growth orientation among states
3- Poor R&D infrastructure to promote complex and unique exports

NITI Aayog Report: Key takeaways 

1- Gujarat topped the EPI 2020 followed by Maharashtra and Tamil Nadu.

2- Among the landlocked states, Rajasthan tops the list followed by Telangana and Haryana while Bihar emerged as the weaker state.

3- Among the Himalayan states, Uttarakhand tops the index followed by Tripura and Himachal Pradesh. 

4- Delhi gained as the best Union Territory followed by Goa and Chandigarh. 

5- Among eight coastal states, six coastal states have featured among the top ten best performing states across the country, indicating strong factors facilitating and enabling exports in the coastal areas. 

6- At present,  70 per cent of India’s export has been dominated by five states – Maharashtra, Gujarat, Karnataka, Tamil Nadu and Telangana. 

7- In 2019-20, India achieved a record high of USD 330.07 billion of merchandise exports, registering positive growth of 8.75%.

8- India has emerged as a weaker export ecosystem and has scored an average of 39 on the index. This is due to the poor trade support to the inability of the states to build export hubs and largely due to export guide. 

9- The low export credit also remains a challenge. Delhi and Chandigarh are the only two states that provide high credit of around 5.31% and 3.36 % respectively, in comparison to the country average of 0.6%.

10- The bigger states, such as Maharashtra, Gujarat and Tamil Nadu lags behind in the export ecosystem while the smaller states such as Sikkim, Tripura and Nagaland do not provide any export credit. 

The report stated the states which are facing similar socio-economic challenges like Chhattisgarh and Jharkhand may look up to the measures taken by these regions and must implement them in their areas to grow their exports. 

The distinction between coastal states and landlocked states

There's a distinction between the coastal and landlocked states as the conditions for exports in these areas are very different, as per Rajiv Kumar. 

The CEO of NITI Aayog, Amitabh Kant stated that the rapid growth of exports is a crucial component for long-term economic growth. A favourable ecosystem enables a country to contribute significantly to global value chains and reap the benefits of integrated production networks, globally.

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