The ET MSME Awards, is one such platform that acknowledges and honours the achievements of micro, small and medium enterprises (MSMEs) in India. Launched in 2020, this prestigious event is now in its fourth edition, recognising excellence across 26 distinct award categories, and anticipates participation from over 15,000 MSMEs from all over the country.
The MSME awards Jury dialogues is a precursor to the actual event – the ‘ET MSME Awards 2023’. The theme of the first of the Jury Dialogues was dedicated to recognising the achievements of MSMEs and their roles in India’s socio economic progress. In this conversation titled, ‘Empowering SMEs: Strategies for boosting exports and navigating global trade challenges’ Miloni R Bhatt, Editor – Digital Broadcast, Economictimes.com spoke to K Rama Devi, Founder and President at Association of Lady Entrepreneurs of India (ALEAP) and Dr. HP Kumar, Director, External Affairs of Power2SME Private Limited and the Former CDM to NSIC. The discussion centred around exports and global competitiveness and strategies that MSMEs can deploy to navigate the challenges of international trade.
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‘Empowering SMEs: Strategies for boosting exports and navigating global trade challenges’ | Watch the full Session
Understanding the current export landscape
According to recent data, the current export landscape in India does not look strong. Data indicates that merchandise exports experienced a decline for the seventh consecutive month in August 2023, amounting to approximately $35 billion—a 7% drop from the previous year. However, the decline can be attributed primarily to subdued global demand, affecting sectors such as petroleum gems, and jewellery. Cumulatively, exports from April to August 2023 contracted by nearly 12% to around $173 billion. The challenges faced by MSMEs in this backdrop are significant, making it crucial to assess export prospects and the strategies needed for growth. Both Devi and Kumar shared their insights and shed light on the challenges that India’s MSMEs face, when it comes to the export sector, and what opportunities they continue to have.
The current decline that we are seeing in India is expected as a result of Covid and other global economic turmoil. “You have seen that the scenario post COVID particularly for MSMEs has gone through a very big turmoil” said K Rama Devi, Founder and President at Association of Lady Entrepreneurs of India (ALEAP). She further went on to add, “ in this scenario, getting into export was very difficult and also the whole country scenario is also like a downtrend for various reasons”.
According to Dr. HP Kumar, Director, External Affairs of Power2SME Private Limited, in the last year, most countries have become self centric with protectionist and political disruptions substantially affecting global trade. “It is not India’s play really, it is the entire world’s play. WTO has also mentioned this impact and they have also forecasted, you know, declining or maybe slowness in world trade,” Dr Kumar said.
The global economic situation is one of inflationary trends and sluggish growth, and that has had its spillover impacts on the Indian economy as well. However, Dr Kumar is hopeful that with active policies from the government and the forex strategy that exports should improve. Devi also agrees that there is a lot of push from the government focusing on MSMEs especially for exports. She believes that scaling up the economy is not possible without exports, and the government recognises this.
Although a lot of government support exists, it is true that we see that many MSMEs are not utilising these structures well enough. Dr Kumar believes this is due to information asymmetry. He goes a step further to say “lack of information, lack of global market intelligence is the biggest reason in fact that the industry, particularly the MSMEs in the country, are not able to take part in the world markets. We have been talking about developing a market intelligence cell where not only the government organisations and the ministries, but even the foreign missions also could play a very active role.”
MSMEs majorly lack the support of the financial institutions. Dr Kumar says the financial sector is still very conservative when it comes to MSMEs, they have the mindset that MSMEs are a risk prone sector. This makes the cost of capital high for MSMEs in India compared to the rest of the world, and if you have a high cost of financing and a high cost of resources, how can you compete at the global scale?
Devi goes on to emphasise that the challenges faced by women entrepreneurs in specific, are manifold, particularly in the context of exports. She highlighted issues such as limited access to credit, inadequate infrastructure, and the need for technology adoption. In the context of exports, the lack of information and market intelligence stood out as a significant barrier. Women entrepreneurs often require handholding and support in understanding foreign markets, navigating trade regulations, and improving product packaging and quality. “A lot of women can become exporters because they’re mostly into what I call export potential areas like textiles, fashion jewellery, and packaging. All these are potential areas where export is possible and it can be woman centric and friendly. If you look at what’s happening in the backend of operations, you know, they require hand holding support, which is not accessible.”
To address these challenges, Devi suggested adopting a consortium or cluster approach. By creating common facilities and shared resources, MSMEs, especially women-led enterprises, can access cost-effective infrastructure and certifications. This approach can enable them to compete more effectively in the international market. Devi also stressed the need for a focused approach in select areas where India has a competitive advantage. Sectors like textiles, agri-processing, handicrafts, and organic products hold immense export potential. Cluster-based initiatives and government support can help these sectors flourish on the global stage.
The Role of FTAs and ‘China Plus One’ Strategy
Both Dr Kumar and Devi agreed that Free Trade Agreements (FTAs) play a vital role in expanding international trade. FTAs can significantly reduce duties, taxes, and trade barriers, opening up new opportunities for Indian MSMEs. India’s proactive pursuit of FTAs with various countries and regions is expected to benefit the export sector, though the full impact may take time to materialise.
Dr. Kumar also pointed out the potential benefits of the ‘China Plus One’ strategy. As global enterprises look to diversify their supply chains beyond China, India presents itself as a viable alternative. However, for this strategy to succeed, India must address issues related to logistics, infrastructure, and ease of doing business.
Empowering MSMEs: The way forward
Empowering MSMEs for global competitiveness requires a multi-pronged approach. Here are some key takeaways from the insights shared by the experts during the discussion:
- Access to market intelligence: MSMEs need better access to market information and intelligence. Establishing a market intelligence cell can help disseminate real-time data on market trends and requirements.
- Financial support: The government should work towards creating a supportive financial environment for MSMEs, including lower interest rates and improved access to credit.
- Infrastructure development: Developing shared infrastructure facilities and common resources can significantly reduce costs for MSMEs, making them more competitive.
- Cluster approach: Encouraging consortiums and clusters within specific sectors can promote collaboration and knowledge sharing among MSMEs, enabling them to scale up and compete globally.
- Export-focused skill development: Offering programs and training for MSMEs on export-related skills, certifications, and lean manufacturing can enhance their competitiveness in global markets.
- Streamlining logistics: Addressing logistical challenges, including transportation, storage, and clearance procedures, can reduce the overall cost of exports.
- Leveraging FTAs and ‘China Plus One’: MSMEs should actively explore the benefits of FTAs and consider the ‘China Plus One’ strategy to diversify their supply chains.
In conclusion, empowering MSMEs for global success is not just a national imperative but a global opportunity. By addressing the challenges they face and providing the necessary support and infrastructure, India can bolster the export potential of its vibrant MSME sector. The government’s commitment to fostering an enabling environment, combined with the innovative strategies and resilience of MSME entrepreneurs, can pave the way for a brighter future in global trade.
To know more about the ET MSME Awards programme, click here.
