In a more fragmented global economy, India’s competitiveness will depend not just on what it makes, but on the cost of getting it to the world. AI generated image At a time when India is trying to build itself into a major manufacturing and export hub, the cost of getting a product from a factory to a foreign buyer is becoming as important as the cost of making it. A manufacturer can produce competitively and still lose that advantage to expensive freight, port delays, insurance, customs procedures, certification requirements or the cost of financing an order. As geopolitical disruptions, tariffs and fragmented supply chains add further uncertainty to global commerce, these costs are becoming harder for exporters to ignore. For India, this shift presents both an opportunity and a challenge. As the country seeks to expand its manufacturing base, attract global supply chains and raise merchandise exports, competitiveness can no longer be measured by production costs alone. The cost of moving, financing, certifying and delivering a product to an overseas market matters just as much. The question, therefore, is not simply whether India can produce more, but whether it can remain competitive in a world where the cost of participating in global trade is rising. Rising Trade Costs When countries discuss trade competitiveness, tariffs often receive the most attention. But for an exporter, the cost of entering a foreign market extends far beyond the customs duty paid at the border. Freight, insurance, port handling, warehousing, customs procedures, certification, financing and delays can all determine whether a product remains competitive once it reaches its destination. These costs become particularly important when supply chains are disrupted. A longer shipping route can raise freight and insurance expenses, while delays can force firms to hold larger inventories or absorb penalties from buyers. At the same time, businesses exporting to multiple markets must navigate different product standards, documentation requirements and rules of origin. For large corporations, these may be manageable operational costs. For smaller firms operating on thin margins, they can become a barrier to exporting altogether. If international trade becomes structurally more expensive, reducing costs within India's own export ecosystem becomes increasingly important. Lower logistics and compliance costs cannot eliminate global disruptions, but they can determine how much of that additional burden ultimately falls on Indian exporters. India’s exposure to rising trade costs is particularly significant because its global trade ambitions are expanding. The country is seeking to increase merchandise exports, attract multinational companies into its manufacturing ecosystem and position itself as an alternative production base within increasingly diversified global supply chains. But becoming part of a global supply chain requires more than competitive factory-gate prices. A manufacturer may produce a component at a competitive cost and still lose the advantage if transporting it to a port is expensive, customs clearance is slow, or imported inputs face lengthy compliance procedures. In globally integrated production, even small frictions can accumulate across multiple stages of the supply chain. This creates a policy challenge for India. The country cannot control international shipping rates, foreign tariffs or geopolitical disruptions. What it can influence is the cost and predictability of trade within its own borders. Ports, roads, railways, warehousing and access to trade finance therefore become part of India’s export competitiveness. The MSME Constraint For India’s smaller exporters, the problem is the cumulative cost of reaching that demand. An MSME entering an overseas market must deal with product standards, certifications, packaging requirements, customs documentation, logistics, payment risks and working-capital requirements often without the scale or specialised teams available to larger firms. This creates an important distinction between being capable of producing an exportable product and being capable of exporting it consistently. A small manufacturer may have a competitive product but lack the resources to obtain international certifications, identify overseas buyers or manage the financial gap between production and payment. Higher freight or compliance costs can then make the economics of a small export order unattractive. The consequences extend beyond individual firms. If global supply chains increasingly favour suppliers that can deliver at scale, on time and with predictable compliance, India’s ability to broaden its exporter base will depend on whether smaller firms can overcome these fixed costs. Bringing more MSMEs into international trade would diversify India’s export base while allowing smaller firms to move beyond domestic markets. The challenge is therefore not simply to reduce the cost of exports, but to reduce the entry cost of becoming an exporter. India has increasingly recognised that export competitiveness depends on the efficiency of the entire logistics chain. Initiatives such as PM Gati Shakti and the National Logistics Policy aim to improve infrastructure coordination, reduce bottlenecks and make the movement of goods more efficient. Digitisation of customs and trade documentation has also helped reduce procedural friction. But infrastructure is only one part of the equation. Exporters, particularly MSMEs, also face challenges around working capital, trade finance, certification and access to overseas markets. A faster port cannot fully solve the problem if a small firm cannot afford the financing or compliance costs required to reach that port. India’s challenge is to make the entire export journey cheaper, faster and more predictable. Global trade is unlikely to return to the low-cost, frictionless environment that defined much of the previous era of globalisation. For India, this makes domestic efficiency more important, not less. The country cannot control global freight rates, geopolitical disruptions or foreign trade barriers, but it can reduce the costs that exporters face at home. India’s next export advantage may therefore come not only from producing more cheaply, but from making it easier and cheaper to trade. If India can lower logistics, financing and compliance costs, it can turn a more fragmented global trading system into an opportunity for deeper and more diversified participation in global trade. (The writer is an economics postgraduate from Jawaharlal Nehru University with research interests in economic policy, trade and global governance. Views personal.)
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