NITI Aayog Lays Out Roadmap To Boost Exports From MSMEs

NITI Aayog has proposed a series of measures to boost exports from micro, small and medium enterprises (MSMEs), including setting up a comprehensive trade portal, promoting ease of merchandise exports, elevating access to export finance and creation of a one-stop information channel for exporters, among others.

In a report titled, ‘Boosting Exports From MSMEs’ NITI Aayog said that to boost ecommerce exports it is essential to create distinction between exporter on record (EOR) and seller on record (SOR), allow reduction in invoice value without any percentage ceiling for all ecommerce exports, introduce annual financial reconciliation process for ecommerce exporters, exempt import duties on rejects/returns, consider an exemption on reconciliation requirements for shipments up to $1000 until NTN (National Trade Network) is implemented and creating a green channel clearance for e-commerce exports,

The report also outlines six broad recommendations aimed at enhancing MSME exports, which recommends “green channel” clearances for MSME ecommerce exporters to address India’s lag in ecommerce utilisation compared to China. 

In 2022, China’s MSME ecommerce exports reached $200 Bn, far surpassing India’s. The report identifies complex compliance processes, particularly payment reconciliation, as a significant obstacle for small exporters. 

On easing of merchandise exports, the Aayog has proposed relaxations for MSMEs from certain compliance requirements for a period while putting in place a process for time bound disbursement of incentives so that working capital is not blocked for MSMEs.

The Aayog emphasised the significant contribution of MSMEs to employment generation, exports, and overall economic growth, noting that exports present a substantial yet underutilised opportunity for the sector.

The Aayog stated in its report that MSMEs contribute significantly to employment generation, exports, and overall economic growth. 

As per the report, MSMEs are crucial to India’s economy, providing substantial employment and contributing to exports and overall growth. With over 11 Cr jobs and accounting for 27.0% of GDP, the sector comprises around 6.4 Cr MSMEs, employing 23.0% of the labour force and ranking as the second-largest employer after agriculture.

Despite their importance, MSMEs face challenges in accessing export markets due to scale limitations. 

“However, the rise of ecommerce platforms presents an opportunity to overcome these barriers. By improving the business environment and easing regulatory hurdles, India can transform its MSME sector into a potent engine for growth,” the report said.

Further, the report highlights sectors such as handicrafts, handloom textiles, ayurveda and herbal supplements, leather goods, imitation jewellery, and wooden products as opportunities for Indian MSMEs in export markets, which collectively exceed $340 Bn globally. 

Additionally, it recommends establishing a comprehensive national trade portal (NTN) to streamline the export process for MSMEs, facilitating seamless operations and competitive advantage.

The report suggests that access to finance is a major challenge for MSMEs. It recommends promoting Export Credit Guarantee to enhance working capital availability, aiming to increase uptake from 10% to over 50% with government incentives. 

It proposes establishing a single marketplace for export credit providers to compete and lower costs for MSMEs.