Enabling India’s Ecosystem to Unlock MSMEs’ Export Potential: NITI Aayog & Foundation for Economic Development Launch Report

Micro, small and medium enterprises (MSMEs) are often hailed as the backbone of the Indian economy. To unlock their potential in accessing global markets, NITI Aayog, in collaboration with the Foundation for Economic Development (FED), on Monday, unveiled a report titled, “Boosting Exports from MSMEs”.

MSMEs account for 11 crore jobs and 27% of India’s GDP. The global trade in MSME-dominated product categories, such as garments, leather, toys, and handicrafts, exceeds $340 billion. However, of the 6.5 crore MSMEs in India, only 60,000 engage in meaningful exports. The study identifies bottlenecks in MSME exports and makes specific and practical recommendations to unlock this opportunity. Navigating exports has especially been difficult for many small enterprises due to lack of financial management capabilities. To tackle these issues, the government has pushed for the formalisation of MSMEs through the Udyam portal and scaled up the provision of financial assistance through credit guarantee schemes. While the ecosystem for exports has been strengthened over time, there is still a need for better market intelligence, enhanced export facilitation cells, and an ecosystem ready for vertical integration with state and central policies to support MSME growth and export capabilities.

The report has highlighted E-Commerce exports as a particularly attractive segment for SMEs to access exports market. Chinese companies already export over $250 billion through ecommerce, accounting for almost 7% of their exports. Indian SMEs also have the potential for growing exponentially in this segment from current $2 billion to over $30 billion in exports. The report has identified specific modifications in the compliance processes to make them better suited for the needs of E-Commerce exports.

Other key recommendations to boost MSME exports in the report include establishing a comprehensive end-to-end National Trade Network (NTN) that would simplify the processes and procedures for MSMEs who are currently required to navigate multiple portals for necessary clearances; AI enabled information provision; enhancing the ease of merchandise exports by offering MSMEs relaxation from certain compliance requirements; and, improving MSMEs’ access to export finance via a competitive marketplace. These steps are aimed at addressing the challenges faced by MSMEs in exporting goods and services, thereby unlocking their full potential in the global market.

Dr VK Saraswat, Member, NITI Aayog, expressed that India needs to streamline export and business processes since small firms, in particular, find them challenging to navigate. He suggested simplifying and reducing processes to ease compliance burdens instead of just digitisation of processes. He also highlighted the need to educate small exporters about the benefits of exports, who currently only focus on catering to the domestic market. He explained that boosting exports from MSMEs requires efforts from the country as a whole and not just the manufacturers.

About NITI Aayog

NITI Aayog is the premier policy ‘Think Tank’ of the Government of India, providing directional and policy inputs.

About Foundation for Economic Development 

FED is a non-profit that aims to facilitate a sustained and broad-based economic growth of over 10% to improve the lives of all Indians. With an approach to identifying high-impact opportunities for economic growth in India, FED works with central and state governments across the ‘value-chain’ of reform to help realise those opportunities.