Opinion

Easing India's path to becoming global export hub

In this co-authored opinion piece, Dr Harsha Vardhana Singh, Former Deputy Director-General, World Trade Organization and Mr Jayanta Dasgupta, Former Indian Ambassador to World Trade Organization, discuss how MSMEs can accelerate India's exports, while continuing to be an employment intensive sector.

India’s twin targets of a $5 trillion economy by 2025-26 and Aatmanirbhar Bharat, encompass two other major objectives, namely increasing employment and exports. Generating domestic jobs is crucial for sustaining the growth process, and MSMEs play a pivotal role in this context. Achieving a $5 trillion economy requires about $1 trillion in merchandise exports, a large rise from current levels.

India’s exports have grown strongly in 2021, owing to focused policy efforts and external factors like the release of pent-up global demand and high international commodity prices, exceeding the target of $400 billion during 2021-22. To cement India’s position as a global export hub in the coming years, continuous efforts would be needed, including through realizing the huge potential of online exports. NASSCOM has estimated that the share of current online-led exports in total exports from India is likely to increase 45 times by 2030. MSMEs, being both an employment intensive sector and significant contributor to India’s exports, is of particular importance. As the industry recovers from the impact of the COVID-19 pandemic, improving access to untapped segments of the global markets will be critical to driving MSME-led exports.

An obvious area with large potential is Business-To-Consumer (B2C) e-commerce exports. According to UNCTAD, the global B2C e-commerce market was about $5 trillion in 2019. Of this, B2C e-commerce international trade is about 9% and is growing each year. COVID-19 has given a further spurt to this growth. A similar shift has been observed in India. The government is making many efforts to improve the operational conditions for e-commerce exporters from India, viz. growing internet connectivity, access to international and indigenous payment platforms and fast developing warehousing and logistics infrastructure, introducing e-commerce specific customs forms, increasing the number of foreign post offices, raising the value limit for e-commerce courier shipments, digital processing of exports customs clearance, and reduction of the number of mandatory documents. Such support policies would help bring India’s UNCTAD e-commerce B2C index rank at par with or ahead of its competing economies.

An obvious area with large potential is Business-To-Consumer (B2C) e-commerce exports. According to UNCTAD, the global B2C e-commerce market was about $5 trillion in 2019. Of this, B2C e-commerce international trade is about 9% and is growing each year. COVID-19 has given a further spurt to this growth. The similar shift has been observed in India.

This momentum needs to be continued with steps such as up-to-date and easy to access information and training to conduct e-commerce, easier regulatory requirements (in particular, the DGFT, RBI and tax related requirements), and continued digitisation of as many processes as possible. Workshops could be organized under the Export Facilitation Centres of MSME, the Export Promotion Councils and utilizing the Niryat Bandhu scheme more effectively. While significant progress has been made by the DGFT and banks in the past few years to enable most of the transactions online, there are a few processes that require integration among them to provide exporters a completely seamless paper-free experience. The need for small exporters or their agents to submit papers in physical form needs to be reduced.

Further, time taken for consignments is another important area of consideration. The 2017 cross border survey of the International Post Corporation (IPC) indicated that 79 percent of European cross border buyers expected to receive deliveries from another country within a maximum of one week. The 2018 survey reflected still more demanding customer expectations for delivery times. Thus, the clearances for export consignments by B2C exporters have to be effected in a matter of hours rather than a few days as at present. To this end, greater digitization and use of risk-based systems needs to be widely introduced to bring down the transaction time sharply. With the current focus of India on giving a special boost to export capacity, the opportunity for increasing both exports and employment should be emphasized by better enabling MSMEs to opt for e-commerce exports as well as direct selling using technology. The experience of MSMEs, which have used e-commerce to export through established platforms, shows a major untapped capability. Potential e-commerce export product categories cover a wide range such as auto components, machine tools, handheld digital instruments, gems and jewellery, textiles and clothing, leather goods, handicraft products including carpets and a host of items from the food and beverages sector.

India has a major potential to become a global export hub (including active involvement of e-commerce exports of MSMEs), which can be expedited by continuing and consolidating the Government’s policy momentum.

Published on June 27, 2022.

Dr Harsha Vardhana Singh

Former Deputy Director-General, World Trade Organization

Mr Jayanta Dasgupta

Former Indian Ambassador to World Trade Organization

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