India is home to over 63 million MSMEs, contributing 30% of India’s GDP and comprising almost half of its exports. In FY21-22, the cumulative exports during the first quarters alone were measured at a record $95 billion. As rightly stated by Prime Minister Narendra Modi, exports will play an essential role in India’s recovery, and in turn, in determining its position in the Global Economy, and helping achieve the government’s $5 trillion economy vision.
Basis an analysis of the sector and its potential, Mr. Kazim Rizvi, Founding Director, The Dialogue, opined, “Various Ministries have their target and now have to set processes in place to achieve the vision shared by our hon’ble Prime Minister. This is a steep but achievable target if we are able create a conducive policy framework for e-commerce exports that lowers the entry barrier for MSMEs to start exporting and helps promote e-commerce as a channel of exports. B2C e-commerce exports are a potential pathway to a $400 billion market and Indian MSME’s need support to unfurl Brand India globally by way of incentivizing, enabling digitization and exports through e-commerce. According to a recent NASSCOM report, the Indian e-commerce market is expected to grow to US$ 200 billion by 2026 and ecommerce exports will be USD 125 billion by 2030. ”
With the government of India looking at an exports-led recovery, three areas of focus will be key for the MSMEs of the country. First, the need for incentivizing MSMEs to embrace technology, digitize and move online, build digital infrastructure to facilitate better technology adoption and physical infrastructure for better reach. Accelerated by the pandemic, it has become crucial to ensure rapid digitization among businesses so that they can constantly reinvent themselves and become more robust and resilient. Steps must also be taken to increase awareness and logistic capabilities, and promote expansion opportunities for MSMEs, enabling end-to-end digitization for exports related processes.
Secondly, as witnessed during the pandemic, online platforms such as e-commerce have shown immense potential in supporting millions of businesses to sustain themselves. Digitization of their businesses has provided an accessibility to hassle-free cross-border trade, enabling exports through already established infrastructure and supply chain. As more and more businesses leverage such online platforms to reach customers globally, India takes one step forward to creating a more robust export-driven growth. There is a need to increase awareness around e-commerce exports, develop specialized logistics capabilities for e-commerce exports, remove disparities in taxation and ease doing business online, and create long-term capabilities to support the growth of e-commerce exports.
Third, is the need to build a focused e-commerce exports policy. Indian exporters’ competitive advantage must be nurtured and developed, and the Foreign Trade Policy (FTP) is an important policy instrument for this goal. The FTP provides the basic framework of policy and strategy for promoting exports and trade. Traditionally, FTP has been focused on B2B exports with little or no mention of B2C channels. However, B2C e-commerce exports today promise immense opportunities for Indian exporters, especially for Indian MSMEs, enabling them to start exporting with lower entry barriers. In lieu of this, making suggestions to integrate B2C e-commerce exports, and inclusion of a dedicated e-commerce chapter in the upcoming FTP 2021 becomes crucial.