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India ranks 39th in the 2024 Global Competitiveness Index, improving from 43th  from 2020. While India’s large domestic market is a significant asset, it also presents challenges for export-led growth, impacting its global competitiveness.

Domestic Market Scale as an Asset

• Economies of Scale: India’s vast consumer base enables mass production, reducing per-unit costs.
  Example: The textile industry, employing over 35 million people, leverages domestic demand to scale operations efficiently.
• Innovation Hub: A large market fosters innovation and product diversification.
  Example: The pharmaceutical sector, valued at $50 billion, benefits from domestic trials before exporting globally.
• Attracting FDI: A sizable market attracts foreign direct investment, boosting exports.
  Example: Apple’s manufacturing shift to India, producing 15% of iPhones, is driven by domestic demand and export potential.
• Supply Chain Development: Robust internal demand supports comprehensive supply chains.
  Example: The automotive industry, contributing to 7.1% of GDP, has developed extensive supplier networks, aiding exports.
• Policy Support: Government initiatives leverage domestic markets to boost exports.
  Example: The Production Linked Incentive (PLI) scheme incentivizes manufacturers for both domestic sales and exports.

Domestic Market Scale as a Limitation

• Complacency Risk: Strong internal demand may reduce export competitiveness.
  Example: 87% of Indian firms are focusing more on the domestic market amid global trade uncertainties.
• Resource Allocation: Prioritizing domestic needs can limit resources for export sectors.
  Example: Limited infrastructure in ports affects export logistics, as resources are channeled to meet internal demands.
• Regulatory Hurdles: Complex regulations can deter export-oriented businesses.
• Infrastructure Gaps: Inadequate infrastructure hampers export efficiency.
  Example: Poor connectivity in certain regions delays shipments, affecting export timelines.
• Skill Shortages: Focus on domestic markets may lead to skill gaps in export sectors.
  Example: Lack of specialized training affects the quality of export goods, limiting global competitiveness.

Ways to Improve India’s Global Competitiveness Index Ranking

• Enhance Infrastructure: Invest in logistics and transportation to support exports.
  Example: Developing dedicated freight corridors reduces transit times, boosting export efficiency.
• Simplify Regulations: Streamline export procedures to encourage global trade.
  Example: Implementing single-window clearances accelerates export processes.
• Skill Development: Train workforce for export-oriented industries.
  Example: Vocational programs in electronics manufacturing enhance product quality for exports.
• Promote Innovation: Encourage R&D to create globally competitive products.
  Example: Incentivizing tech startups leads to innovative solutions with export potential.
• Strengthen Trade Relations: Forge international partnerships to expand export markets.
  Example: Bilateral trade agreements open new avenues for Indian exporters.

India’s domestic market is a double-edged sword—while it provides a foundation for economic growth, it can also lead to export complacency. To climb the Global Competitiveness Index, India must balance internal demand with strategic export initiatives, enhancing infrastructure, simplifying regulations, and fostering innovation.

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