Niti Aayog called for a concerted push to ease access to export finance and boost e-commerce exports to realize the potential of micro, small and medium enterprises (MSMEs) in the country.
In a report released on Wednesday, Aayog said small businesses face difficulties in entering export markets due to inherent obstacles posed by economies of scale. She said: “For small and medium-sized enterprises, it is proving more difficult to enter foreign markets, meet compliance requirements, achieve cost-effective production and efficiently manage customer logistics. There is,” he added.
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“By changing our business environment to facilitate seamless exports through e-commerce platforms and addressing the essential elements of ease of doing business, we are fundamentally making our MSME sector a formidable growth engine. “This has the potential to be a catalyst for global change,” the report said.
“One of the main reasons for this gap is the cumbersome compliance processes associated with exports, especially when it comes to payment reconciliation, which is especially difficult for new or small exporters. It is essential to distinguish between Exporter of Record (EOR) and Seller of Record (SOR), allow invoice reduction without percentage cap for all e-commerce exports, and introduce an annual financial reconciliation process. E-commerce exporters will be exempted from import duties on refusals/returns and will be exempted from import duties on shipments up to $1000 in value until the NTN (National Trade Network) is implemented and Green Channel Clearance for e-commerce exports is created. “We will consider waiving the coordination requirements,” the report said.
The report, jointly prepared by Niti Aayog and the Nonprofit Economic Development Foundation, says India needs NTN to ease the compliance burden on MSMEs. This trade network operates as an end-to-end single window system. “The Department of Commerce may form a task force to review the status of previous efforts in this regard (such as SWIFT) and create a time-bound program to implement a national trade network on par with the best in the world. “There is,” the report states. Said.
Access to finance has always been considered a key bottleneck for MSMEs. Towards this end, facilitation of export credit guarantees could help improve the availability of working capital for MSMEs, according to Aayog.
“The current ECGC (Export Credit Guarantee Corporation) scheme has a penetration rate of only 10% and the government needs to create incentives to increase it to over 50%.Finally, in the case of higher education loans, “In this way, a single market can be created where all providers of export credits can compete for business and help reduce costs for MSMEs,” the report said.
The report also aims to address the information asymmetry available to MSME exporters with the help of artificial intelligence, by providing vendors with a single source of accurate data on tariffs, compliance, finances and incentive availability. He stated that there is a need to develop an information portal.
Data also needs to be accurately assessed, according to the report. “Existing estimates for MSME exports are likely to be unreliable and are almost certainly inflated given their reliance on outdated lists of reserved sectors for MSMEs. Initiate any improvements. requires accurate measurement and consistent tracking of impact.”
The central think tank also asked MSMEs to be exempted from compliance burden for a certain period. Mistakes in compliance must be forgiven as MSMEs learn the ropes of export markets.
“Meanwhile, there is a need to create a time-bound process for disbursing incentives so that MSMEs' working capital is not hampered,” the report said.
According to a statement issued with the report, this step could increase India's MSME exports by 15 times to $30 billion in the coming years. According to data used in the report, MSMEs have an export potential of $318 billion in sectors such as herbal supplements, Ayurvedic products, wood products, jewellery, handicrafts and handloom textiles.
