Andhra Pradesh is a coastal state located in the southeastern part of India. With abundant natural resources, a favorable investment climate, and a rich pool of human resources, Andhra Pradesh has the potential to emerge as one of the key contributors to growth in India’s exports. However, currently, Andhra Pradesh’s export orientation is lower when compared to several other coastal states. In this article, we will explore the potential of Andhra Pradesh to boost India’s exports and the steps that can be taken to enhance its export ecosystem.
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Current State of Andhra Pradesh’s Merchandise Exports
Merchandise exports accounted for nearly 12.0 percent of Andhra Pradesh’s GSDP in 2021-22. This share is lower than the share of merchandise exports in GSDP of other coastal states such as Gujarat (27.4 percent), Maharashtra (15.9 percent), Goa (22.6 percent), and Odisha (14.2 percent). However, despite this lower share, Andhra Pradesh has witnessed strong y-o-y growth rates in its merchandise exports during 2019-20 and 2020-21.
While merchandise exports from the state witnessed an upsurge during the recent period, they remained concentrated in a few products. Analysis of Andhra Pradesh’s merchandise exports indicates that the top 10 export items and top 10 destinations accounted for shares of nearly 69.6 percent and 55.5 percent, respectively, in the total merchandise exports from Andhra Pradesh during 2021-22.
Potential for Diversification
To enhance its export orientation and bridge existing gaps in the export ecosystem, there is a need for diversification towards higher value-added segments and less explored geographies. There are two sectors where diversification can be particularly beneficial: automotive and textile.
In the automotive sector, there is a need for diversification towards the electric vehicles (EV) space, considering the rising global demand for EVs in recent years. The incentives in the AP Electric Mobility Policy 2018-23 could help increase production capabilities and enhance exports of EVs in the medium term.
In the textile sector, Andhra Pradesh’s exports mainly comprise cotton, knitted/crocheted fabric, and knitted and non-knitted articles of apparel and clothing. Technical textiles which are used for non-aesthetic purposes in sectors of automobiles, pharmaceuticals, infrastructure, sports, construction, packaging, agriculture, and defense, among others, have a high potential for growth. Andhra Pradesh has a strong base in cotton production and spinning mills, which can be leveraged to enhance the production of technical textiles.
Apart from these two sectors, there are several other sectors where Andhra Pradesh can diversify its exports basket. These include food processing, marine products, pharmaceuticals, and IT services. The state has a favorable investment climate and abundant natural resources that can be leveraged to enhance the competitiveness of these sectors.
Steps to Enhance Andhra Pradesh’s Export Ecosystem
To achieve an exports target of US$ 60 billion by 2027-28, there is a need for a dynamic and demand-responsive strategy. The six-pronged strategy outlined in the study includes enhancing trade competitiveness, enhancing value addition in the production cycles, creating awareness about exports, promoting innovation, increasing visibility of Andhra Pradesh’s exports, and creating an institutional mechanism for nudging exports to a higher growth trajectory.
Enhancing trade competitiveness involves improving infrastructure facilities such as ports and airports; reducing transaction costs; simplifying procedures; and providing incentives for exporters. Enhancing value addition in the production cycles involves promoting backward integration; encouraging R&D activities; promoting skill development; and providing access to finance.
Creating awareness about exports involves organizing export promotion events such as trade fairs and exhibitions; disseminating information about export opportunities through various channels such as websites and social media platforms; and providing training programs for potential exporters. Promoting innovation involves encouraging technology adoption; promoting collaboration between industry and academia; and supporting startups.
Increasing visibility of Andhra Pradesh’s exports involves branding initiatives such as creating a state-level brand identity for exports from Andhra Pradesh; showcasing success stories of exporters from the state through various media channels; and participating in international events such as trade fairs.
Creating an institutional mechanism for nudging exports to a higher growth trajectory involves setting up an export promotion council; creating a single-window clearance mechanism for exporters; and providing handholding support to potential exporters.
Conclusion
Andhra Pradesh has the potential to emerge as one of the key contributors to growth in India’s exports. However, there is a need for diversification towards higher value-added segments and less explored geographies. The state has a favorable investment climate and abundant natural resources that can be leveraged to enhance the competitiveness of various sectors. To achieve an exports target of US$ 60 billion by 2027-28, there is a need for a dynamic and demand-responsive strategy that focuses on enhancing trade competitiveness, value addition, awareness about exports, innovation, visibility of exports, and creating an institutional mechanism for nudging exports to a higher growth trajectory.
The PDF file provides a six-pronged strategy to achieve this target. The sectors with high potential for growth include agricultural and allied sector, pharmaceuticals, textiles, auto and auto components, petroleum and petrochemicals, electronics, electrical machinery and equipment, tourism and creative services, food processing, marine products, and IT services.
