For several decades now, India’s export story has been told by the country’s business elite. We were looking at multi-billion-dollar business houses, huge automobile factories, and heavy engineering firms that led the way in exporting their products around the world. However, as there is a fundamental change taking place in the global supply chain system, a new truth emerges: the age of monolithic corporate export supremacy has seen its best days.
The next challenge for India lies with small but efficient businesses. The future stars of India’s export business won’t be big companies; they will be our Micro, Small, and Medium Enterprises (MSMEs).
The Hard Numbers That Have Led to This Change
This shift isn’t a theoretical prediction; it is already being mapped out by hard economic data. As per the figures in the Union Budget and other economic reports, MSMEs provide the very base of our economic system by contributing 31.1%, 35.4% and 32.82 crore jobs respectively to our GDP, manufacturing and the number of companies that have been registered.
More importantly, the exports of MSMEs have witnessed a tremendous increase over the past few years, increasing from ₹3.95 lakh crore to a remarkable ₹12.39 lakh crore. Currently, MSMEs contribute approximately 45.7%-48.5% of the total merchandise exports in India.
While the traditional model of corporations depends on rigid mass production and huge overhead delays, MSMEs rely on flexible batch production and agility in pivoting.
Why Scalability Is Not the Endgame Anymore
The global market has matured beyond an era where scale trumps all deals. Large corporations have been very effective with standard and large-scale production but struggle with institutional inefficiencies. MSMEs have certain unique structural advantages in the current macroeconomic environment.
• Customisable Small Batch Production: There is an increasing tendency among international buyers towards non-rigid and flexible contractual agreements. Whether it is precision-engineered tools, advanced electronic parts, or customised green packaging, the MSMEs can customise their production lines within days, whereas it would take months for a conglomerate to go through its process of compliance.
• The “China+1” Shift: The international buyers want to hedge their supply risk by diversifying their sourcing base. They want to avoid multi-million-dollar contracts from single-source giants and work with nimble regional manufacturers’ clusters in India, such as Coimbatore for engineering and Ludhiana for textiles.
• Speed for E-Commerce Age: Cross-border B2B and B2C e-commerce demands speed in fulfilling orders and rapid changes in inventory management. The landmark policy decision to fully eliminate the value cap of ₹10 lakh per consignment for courier exports opens up an enormous runway for artisanal, D2C, and micro-manufacturing players.
Growth Constraints: What Is Holding Us Back?
Despite the strengths highlighted above, there is a hand tied behind the backs of MSMEs in India. We need to deal with our structural weaknesses if we are to move from accidental exporters to becoming structural leaders around the world.
While corporates have ultra-cheap interest corporate bonds, small businesses face the problem of a huge credit crunch. A very large percentage of small exporters end up having their working capital locked up in transit times, high freight rates, and cumbersome letters of credit.
In addition, the cost of compliance is very high. While a big corporation can afford to pay legal departments to understand ESG requirements of the West, a small exporter manufacturing in a Tier-II city finds it difficult to understand complex carbon border taxes and other international certification issues.
The Blueprint: Practical Solution Framework for Creating Global MSME Champions
Breaking the next trillion-dollar barrier in export value needs pragmatic, practical intervention and not high-level policy pronouncements.
1. Reconfiguring Trade Liquidity Using TReDS: Working capital fuels trade. The mandatory compliance for CPSEs with the Trade Receivables Discounting System (TReDS) needs to be strictly enforced. TReDS integration with GeM and trade receivables that can be freely traded as financial instruments will bring immediate liquidity to starved micro-exporters.
2. Radical Digitalisation of the Last Mile: Removing the export value cap on couriers was Step A. Step B needs to be the creation of special E-commerce Export Hubs (EEHs) close to important logistical bottlenecks. These EEHs will function as green channel custom clearance centres where low-value items can be cleared using AI-based risk management systems with no human contact and rent-seeking involved.
3. Escort Services for Compliance: Compliance with global standards needs help from institutions. We need to ramp up our ZED (Zero Defect, Zero Effect) scheme for providing subsidised international quality audits. Creation of trade desks at the district level within the framework of “Districts as Export Hubs” will enable microenterprises to avail themselves of trade lawyers, logistics aggregators and carbon accounting services.
The Way Forward
“Made in India” will no longer have the logo of the largest corporate groups in the country. It will be about the total of grit from millions of micro-factories, specialist family-owned engineering facilities, and technology-driven niche manufacturing entities.
Through the provision of frictionless liquidity, digital highways, and quality systems that meet global benchmarks to our MSMEs, we will create an export system that is diverse and robust, not to mention totally unstoppable.