Why is it in the news?

• NITI Aayog’s report “Boosting Exports from MSMEs” outlines measures aimed at enhancing e-commerce exports from the MSME sector.

MSMEs and its Significance

• MSMEs (Micro, Small, and Medium Enterprises) are often hailed as the backbone of the Indian economy, contributing substantially to employment and GDP growth.
• They provide jobs to over 11 crore people and contribute around 27% to India’s GDP.
• The sector comprises approximately 6.4 crore units, with 1.5 crore registered on the Udyam portal, making it the second-largest employer in India after agriculture.
• MSMEs play a pivotal role in manufacturing output, accounting for 4% of the total manufacturing output. They also significantly contribute to exports, contributing 45.03% to the country’s total exports.
• Despite their substantial contribution, MSMEs have yet to fully exploit the potential of exports.
• Various sectors like handicrafts, handloom textiles, ayurveda, herbal supplements, leather goods, imitation jewellery, and wooden products offer significant opportunities for export growth, with global markets exceeding USD 340 billion.

Challenges Faced by MSMEs in Exports

• MSMEs encounter numerous challenges when venturing into export markets, including difficulties in complying with regulatory requirements, achieving cost-effective production, managing logistics, and accessing finance.
• The cumbersome compliance process associated with exports, especially regarding payment reconciliation, poses a significant barrier for small and new exporters.

Recommendations to Boost MSME Exports

• Create One-Stop Information Channel for Exporters: Establish a comprehensive data intelligence portal utilizing AI to provide up-to-date and accurate information to MSMEs.
• Create National Trade Network (NTN) as Comprehensive Trade Portal: Develop an end-to-end national trade portal (NTN) to streamline export processes and provide seamless experiences for exporters, including query resolution and paperwork assistance.
• Promote E-commerce Exports: Address barriers hindering MSMEs’ access to e-commerce markets, such as cumbersome compliance processes. Further, encourage e-commerce exports by simplifying payment reconciliation and other procedures.
• Promote Ease of Merchandise Exports:

1) Target Ease of Doing Business initiatives specifically at MSME exporters.

2) Offer temporary relaxations from certain compliance requirements and forgiveness for errors as MSMEs familiarize themselves with export market demands.

3) Implement a time-bound disbursement process for incentives to prevent working capital blockage for MSMEs.

• Improve Access to Export Finance:

1) Increase uptake of Export Credit Guarantee Corporation (ECGC) schemes by creating incentive packages to boost participation to 50% or more.

2) Establish a single marketplace for export credit providers to compete for business, reducing costs for MSMEs.

• Ensure Accurate Measurement: Integrate Directorate General of Foreign Trade (DGFT) trade data with GST and income tax data using PAN numbers as identifiers to create a reliable depiction of MSME exports.

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Conclusion

• The potential for MSMEs to boost exports is substantial and can be realized through pragmatic measures that reduce the cost and friction of doing business for these firms.
• Implementing the recommendations outlined in the report could unlock significant growth opportunities for MSMEs and contribute to India’s export competitiveness on the global stage.