20-March-2024-Special-Article

BOOSTING EXPORTS FROM MSMES

The National Institution for Transforming India (NITI) Aayog recently released a report titled “Boosting Exports from MSMEs,” focusing on facilitating smaller firms’ access to export markets through e-commerce platforms.

This initiative aims to enhance the competitiveness of Micro, Small, and Medium Enterprises (MSMEs) and foster their growth in the global market.

Key Recommendations of the Report:

Single Information Portal for Exporters:

• Creation of a National Trade Portal (NTN) to provide comprehensive information on market tariffs, paperwork requirements, finance sources, and potential customers.
• Leveraging AI-based interfaces to streamline the export process for MSMEs, ensuring seamless operations and competitive advantage.

Annual Financial Reconciliation Process:

• Introduction of an annual financial reconciliation process for e-commerce exporters.
• Exemptions on import duties for rejects or returns and creation of a green channel clearance for e-commerce exports.

Distinction Between EOR and SOR:

• Distinguishing between Exporter on Record (EOR) and Seller on Record (SOR) for e-commerce exports.
• Allowing a reduction in invoice value without a percentage ceiling to boost exports.

Promotion of Export Credit Guarantee:

• Promotion of Export Credit Guarantee to improve working capital availability.
• Government incentives to increase uptake from the current 10% to 50% or more.

Easing Merchandise Exports for MSMEs:

• Relaxation of compliance requirements for MSMEs for a limited period.
• Implementation of a time-bound disbursement process for incentives to prevent the blocking of working capital.

Identification of Export Opportunities in Specific Sectors:

• Identification of sectors like handicrafts, textiles, ayurveda, leather goods, and wooden products with substantial global market potential exceeding USD 340 billion.

Current Scenario of the MSME Sector in India:

Contribution to the Economy:

• MSMEs account for over 11 crore jobs and approximately 27% of India’s Gross Domestic Product (GDP).
• Rapid growth in the establishment of new MSME units, particularly in micro-enterprises.

Export Potential:

• Despite significant employment and manufacturing output, India’s share of global exports of low-skilled manufacturing products is only 5%.
• Many MSMEs have annual turnover from exports of less than Rs 1 crore, indicating untapped export potential.

What is MSME?

MSMEs play a crucial role in India’s economy, contributing significantly to employment generation, industrial production, and overall economic growth.

• They are engaged in the production, manufacturing, processing, or preservation of goods and commodities, representing 38.4% of total manufacturing output and contributing 45.03% of the country’s total exports.

Current Challenges Related to the MSME Sector in India:

Financial Constraint:

• Limited access to timely finance, with only 16% of SMEs having access to finance.
• Reliance on internal resources due to the lack of timely finance, hindering growth and expansion.

Lack of Innovation:

• MSMEs often rely on outdated technologies, leading to lower productivity levels and reduced competitiveness.
• Lack of entrepreneurial initiatives and awareness hinder the adoption of new technologies and tools.

Majority of Small Firms:

• Over 80% of MSMEs are micro and small businesses, facing challenges in accessing government schemes and support due to communication gaps and awareness issues.

Lack of Formalisation:

• Limited formalisation among MSMEs, with a large percentage of manufacturing units being unregistered.
• Lack of formalisation contributes to the credit gap and regulatory constraints, limiting growth opportunities.

Conclusion:

Addressing the challenges and implementing the recommendations outlined in the NITI Aayog report can unlock the full potential of the MSME sector, enabling it to thrive in the global market and contribute more significantly to India’s economy.

Mains Question:

1. Discuss the recent initiatives proposed by the National Institution for Transforming India (NITI) Aayog to boost exports from Micro, Small, and Medium Enterprises (MSMEs) in India through e-commerce platforms. (150 WORDS).