Navigating the export maze for MSMEs

Digitisation holds immense potential to revolutionise MSME exports. Digital technologies can streamline exports, reduce costs, expand reach, and enhance operational efficiency

Micro, small, and medium enterprises (MSMEs) constitute nearly half the country’s total exports, contributing approximately 33 per cent to its GDP. However, the facilitation of these exports is primarily orchestrated by significant export houses, mainly due to two key factors: Scarcity of market information and deficiency in business contacts. The absence of a formal institutional structure in numerous MSMEs places them at a disadvantage in addressing information asymmetries. In contrast to larger corporations endowed with dedicated resources for advertising, market research, and distribution networks, MSMEs often need more financial capabilities due to their smaller scale. 

Another prominent hurdle for MSMEs venturing into international trade is lack of awareness regarding export procedures, documentation prerequisites, and non-tariff barriers (NTBs) applicable to their products. This knowledge deficit frequently leads to delays, escalated costs, and missed opportunities.

This information void can be bridged; a critical need exists for comprehensive and easily accessible initiatives tailored to the specific requirements of MSMEs. These initiatives may encompass workshops, webinars, online resources, and dedicated support centres. Such endeavours should offer lucid explanations of export processes, meticulous guidance on documentation requirements, and exhaustive information on NTBs and their ramifications.

Digitisation holds immense potential to revolutionise MSME exports. By adopting digital technologies, they can streamline export processes, reduce costs, expand market reach, and enhance operational efficiency. E-commerce platforms, online marketplaces, and digital trade facilitation tools can empower them to connect with global buyers and compete effectively in international markets. These technologies can help reach a wider audience, overcome geographical barriers, and present their products and services in a more professional and visually appealing manner. Additionally, digital trade facilitation tools can automate Customs clearance procedures, reduce documentation requirements, and streamline international payments, reducing transaction costs and enhancing the overall export experience.

India’s engagement in free-trade agreements (FTAs) has opened up new avenues for MSME exports, offering preferential tariff rates, and reduced non-tariff barriers in various target markets. However, their utilisation of FTAs needs to be higher, highlighting the need for targeted outreach and capacity-building programmes. MSMEs need to be equipped with the knowledge and skills to navigate complex FTA provisions, identify potential export opportunities, and effectively utilise the benefits offered by these agreements. To help them take advantage of FTAs, they can participate in workshops, seminars, and training programmes that provide detailed information on the specific provisions of FTAs and the procedures for utilising them. Moreover, government-sponsored initiatives can encourage MSMEs to participate in trade fairs and exhibitions in FTA partner countries.

Creating a supportive ecosystem for MSME export requires a multi-pronged approach involving government, industry associations, and financial institutions. Government initiatives should simplify export procedures, reduce compliance costs, and incentivise MSMEs to adopt technology and participate in international trade fairs and exhibitions. These incentives include tax breaks, subsidies, and funding for export-related activities. Industry associations can be crucial in providing mentorship, networking opportunities, and market insights to MSMEs. They can organise trade missions, facilitate matchmaking between MSMEs and potential buyers, and provide guidance on complying with international standards and regulations. Financial institutions can tailor their products and services to the specific needs of MSME exporters, offering simplified loan applications, reduced collateral requirements, and export-oriented financing solutions. These tailored solutions can address the specific financing needs of MSMEs, such as working capital for production, pre-shipment finance for raw materials, and post-shipment finance for receivables collection.

A comprehensive approach that combines policy reforms, capacity-building initiatives, and strategic collaborations is essential. Every stakeholder needs to work hand in hand to create a supportive ecosystem for MSMEs through digitisation, education on trade agreements, and empowering initiatives. Together, we can create a thriving export landscape and pave the way for India’s success on the global stage.

The writer is MD & CEO, Godrej Capital