Here is how Government policies are helping MSMEs and small businesses to trade globally
Government of India aims to bolster India’s march towards becoming a USD 5 Trillion economy and boost Indian global trade to USD 2 Trillion in next few years. SMEs remain an integral part of this endeavor. The government has been constantly working to make global trade more & more accessible to SMEs
According to WTO, the World Export of WTO Member countries itself was USD 23 Trillion last year and is expected to grow 4 to 5% year on year. This means more demand and new opportunities in the global markets, which further means, more opportunities for SMEs to take advantage of the vacuum between current supply and foreseen world demand and export their products globally.
Further, the Government aims to bolster India’s march towards becoming a USD 5 Trillion economy and boost Indian global trade to USD 2 Trillion in next few years. The government has been doing a great job on this front for the past few years. The flagship programmes such as Make in India, Digital India, Skills India and Startup India are the strong foundations on which the sustainable growth could be built. India’s overall exports (merchandise and services) were estimated to be $483.98 billion in April-February 2018-19, exhibiting a growth of 8.73% over the year-ago period.
There have been many reforms and schemes to help the businesses all around the country in growing internationally.
The Foreign Trade Policy 2015-20
The Foreign Trade Policy 2015-20 and other global trade schemes by the Government provide promotional measures to boost India’s exports with the objective to remove process, system and infrastructural inefficiencies and to help provide exporters a level playing field. In the Mid-Term Review of the Foreign Trade Policy 2015-20 the Ministry of Commerce and Industry enhanced the scope of MEIS (Merchandise Exports from India Scheme) and SEIS (Service Exports from India Scheme)
For example, the MEIS incentive for ready-made garments and made-ups was increased by 2 per cent, the SEIS incentive by 2 per cent and the validity of Duty Credit Scripts increased from 18 months to 24 months. In December last year, the Government doubled the MEIS incentive on Onion exports from 5 to 10%.
The Department of Commerce announced increased support for export of various products and included some additional products under the MEIS scheme in order to help exporters.
Export Promotion Schemes
There are many schemes such as MEIS, SEIS, Duty Exemption & Remission schemes, Zero duty EPCG scheme, Post Export EPCG Duty Credit Scrip Scheme, EOU/EHTP/STP & BTP SCHEMES, interest subsidy scheme for exporters launched by the government to boost exports from India.
1. MEIS: With The MEIS scheme provides incentive in the form of duty credit scrip to the exporter. This is paid as percentage of the FOB value of the goods exported. The aim is to make India’s products more price competitive in the overseas markets and emphasis is given to those products which are of India’s export interest.
2. DUTY EXEMPTION & REMISSION SCHEMES - These schemes enable duty free import of inputs for export production with export obligation.
3. EPCG SCHEME
- Zero duty EPCG scheme - Under this scheme import of capital goods at zero custom duty is allowed for producing quality goods and services to enhance India’s export competitiveness. Import under EPCG shall be subject to export obligation equivalent to six times of duty saved in six years. Scheme also allows indigenous sourcing of capital goods with 25% less export obligation.
- Post Export EPCG Duty Credit Scrip Scheme - A Post Export EPCG Duty Credit Scrip Scheme shall be available for exporters who intend to import capital goods on full payment of applicable duty in cash.
4. EOU/EHTP/STP & BTP SCHEMES - Units undertaking to export their entire production of goods and services may be set up under this scheme for import/ procurement domestically without payment of duties.
There are many more schemes launched by the government to boost the exports from India. Some of these initiatives have been successfully implemented and the results have been reflected in the export growth rate in recent years. These initiatives also help bring up new ideas and research in order to keep its growth rate consistent and lead the market in the coming years.
New Markets Focus
There is need to focus on specific products for specific market where India can deliver the goods with great competency. For example for agricultural export, we have an opportunity to increase productivity and land our foot on the markets of South East Asian and Middle East countries to increase our exports there. Adding new items to the export basket, alongside keeping in mind standards, understanding real markets and leading a SWOT examination on contending countries, would help to increase exports further.
Government of India is planning to set up trade promotion bodies in 15 countries to boost exports from Small and Medium Enterprises (SME) in India. The Government of India is expected to announce an interest subsidy scheme for exporters in order to boost exports and explore new markets. MoU was signed last year to export non-basmati rice to China. India’s ongoing effort to help African nations has also resulted in our trade promotion and growth with Africa. With these efforts, our export to Africa has been growing aggressively over last couple of years .
The Government has taken initiatives to open newer market for products. This helps in creating blue oceans for our SMEs and our products rather than competing in the already saturated red oceans.
India is the second-largest online market worldwide with over 483 million internet users and 298 million Smartphone users. The government has been actively introducing digitization in multiple areas to help exporters.
1. Digitization of export/import transactions - The initiative of Indian Customs introducing full and comprehensive digitization of export/import transactions and leveraging RFID technology to improve export logistics is expected to significantly speed up the export process for SMEs as well as would help make the global trade safer and easier for SMEs.
2. Open data access - A challenge for export industries, particularly MSME (medium and little scale undertakings) players, had been the lack of awareness. The government organized this by putting lot of relevant data in the open area. It is scattering the data straight up to the district industrial centres, increasing global awareness and helping bridge the knowledge and information gap.
3. Electronic IEC – IEC is mandatory for carrying out exports and imports from/to another country. The DGFT has facilitated the online filing of applications to obtain IEC and various Authorizations/scrip for which a web interface has been introduced for online filing of application.
4. E-BRC - The initiative of Electronic Bank Certificate (e-BRC) enables DGFT to capture essential details of realization of export proceeds directly from the banks by means of secured electronic mode. A Memorandum of Understanding (MOU) has been signed with 14 State Governments for sharing e-BRC data to benefit the exporters with GST refunds.
The digitization is expected to help in information dissemination and power the real-time trade intelligence, enabling SMEs to become globally aware and help them make informed decisions regarding global trade
Streamlined and Simplified Customs Process
1. Integrated Declaration - The Central Board of Excise and Customs (CBEC) has developed an 'integrated declaration' process leading to the creation of a single window which will provide the importers and exporters a single point interface for customs clearance of import and export goods.
Logistics and shipment are one of the key components of end-to-end export process and improving these with technology would make the process faster and more adoptive for SMEs.
2. Round-the-Clock Customs Clearance - 24*7 customs clearance has been made available at 19 sea ports and 17 air cargo complexes. The round-the clock Customs clearance facility has been extended to all Bills of Entry at 19 sea ports and 17 Air Cargo Complexes.
3. Single Window Interface - Single Window Interface for Facilitating Trade (SWIFT) has been launched to facilitate the easier perusal of business.
4. Facilitating Export of Perishable Export Products - To reduce the costs of transportation and handling, a single window system has been introduced to facilitate the export of perishable agricultural produce. Under this system, multi functional nodal agencies will be accredited by the Delhi based Agricultural and Processed Food Products Export Development Authority (APEDA).
Infrastructure And Logistics
India ports infrastructure market stood at more than 1,212 MMT in 2018 and is projected to reach 1, 784 MMT by 2024, owing to increasing government initiatives to enhance the capacity and utilization of the country's major and minor ports. The major ports had a capacity of 1,452 million tonnes by FY18 end. The Maritime Agenda 2010-20 has a 2020 target of 3,130 MT of port capacity.
The government has taken several measures to improve the logistics. A roadmap has been prepared for increasing the Indian port capacity to 3500+ MMTPA by 2025 to cater to the growing traffic.
1. Port Modernization & New Port Development - This includes port operational efficiency improvement, capacity expansion of existing ports and new port development.
2. Port Connectivity Enhancement: The Government has taken various initiatives for promotion of Coastal Shipping such as dedicated Coastal Berths in Major Ports, financial assistance to State Government for Coastal Berth.
3. Port-led Industrialization - 35 potential port-linked industrial clusters across three sectors, namely – Energy, Materials and Discrete manufacturing, have been identified. These include 12 bulk clusters for basic input industries such as Power, Refineries & Petrochemicals, Steel and Cement and 23 discrete manufacturing clusters, in the labour intensive sectors of Electronics, Apparel, Leather Products, Furniture and Food-Processing etc
SMEs are an integral part of any economy; they form the back-bone of the economy. While the government consistently focuses on making India a $5 Trillion economy & execute about $2 Trillion in global trade in next few years, SMEs remain an integral part of this endeavor. The government has been constantly working to make global trade more & more accessible to SME.
1. Model farms – Planned initiative to transform agriculture by setting up world-class farms across the country where farmers learn to be productive by working in association with a professional firm which takes care of farming, marketing, and exports.
2. MSME Clusters - National, regional and sector specific clusters and business centers for MSME in Public Private Partnership model for state of the art infrastructure comprising physical infra, knowledge infra and technology and innovation support for MSME.
3. Increased Export contribution - by supporting and developing MSME segment to be globally competitive and adopt research and development, innovation and global technologies. Provide MSME with global market access by entering into bilateral trade agreements and set off arrangements.
4. Relaxed GST regulations - The relaxation and the offerings given to the MSME community around GST regulations and access to capital in the budget today is a positive move and would help our MSMEs become sustainable and globally competitive. The proposed relaxation around GST regulations would enable SMEs to focus more on their core business and with squeezing margins across products; the 2% interest rebate for GST registered units would help them stay competitive.
5. Revised and better systems - The introduction of revised system of importing duty-free capital goods and inputs for manufacture and export, along with introduction of single point of approval would incentivize more SMEs to explore global opportunities and global trade. This would result in an efficient global value chain for SMEs where they could easily import the machinery or raw materials and then either produce goods or add value to the existing goods and then export those as well as get the input credits, making it cost effective for them.
6. Making Globally Competitive - There are new initiatives such as STICK (Science, Technology, Innovation and Creation of Knowledge) to keep the SMEs abreast of the changing paradigms of innovation and technological advancement and to make them globally competitive. Government of India has launched the Intellectual Property Rights for Enhancing awareness about IPRs to enable the IMSMEs for being more competitive in the global environment.
The government policies & schemes have been an amazing boost for SMEs, and with proper guidance, hand-holding and partner based approach, the SMEs would be able to reap optimum returns from them.
The government, with their efforts, has been constantly increasing the size of the global trade pie for Indian businesses. With more and more of our SMEs on the path of becoming globally visible, globally aware and globally competitive, and with favorable government policies for the SME sector and exports, our global trade is expected to rise exponentially in the coming years.
Pawan is an entrepreneur with expertise in trade and technology. As founder & CEO of Connect2India, a one stop source with end-2-end managed solution for export/import, he is enabling and empowering 65 million Indian SMEs to go global. With degree from London Business School, Pawan has enjoyed solving core business problems - be it at Fortune 500 companies or in his own entrepreneurial ventures.