Trade, Import and Export for MSME: The Kovid epidemic has changed the outlook of countries and multinational companies to engage in global trade, characterized by advanced and alternative economies that promise quality production. Exceeding $ 400 billion in FY 2021-22 has helped India achieve a decent spotlight as a growing manufacturing and export hub in the world as well as a strong competitor among the top global value chains (GVCs). Here, India’s 6.3 crore MSMEs, which account for about half of the country’s exports, will be among the key components. However, it will not be a smooth journey for the country and its huge MSME base to develop or strengthen its presence in GVC. So, what is the challenge here? Experts explained the Financial Express Online SME Exports Summit 2022 on Friday.
In the case of MSMEs, India’s export basket mainly consists of products that lack sophistication in terms of technology that produces medium to high-tech products compared to rich countries, says MH Bala Subramanian, Professor (HAG), Department of Management Studies. Indian Institute of Science, Bangalore. As the economy has grown it has diversified from agriculture to production and trade baskets have evolved from natural resources to low-tech and more medium and high-tech products but India has moved away from manufacturing towards services. According to Subrahmanya, in such a change, there is virtually no or negligible step in the production of high-tech products from natural resources.
“So, unless we strengthen our MSME sector to move towards a medium and high-tech product segment, there is no easy way for India to enter GVC on a large scale,” he added in a panel discussion on GVC manufacturing from India.
Furthermore, most MSMEs are in food and beverage, wood and timber products, textiles, etc., under the consumer goods division where the sophistication of technology is largely lacking compared to the intermediate product sector like auto components and fabrication units. More sophisticated, Subramanian noted that he called for replicating the technology-driven model of business in Bangalore into MSME clusters across India. “Such support systems should be set up in all MSME clusters in India to encourage science and technology networks, industry-institute partnerships, and connections with MNCs. This will go a long way in promoting the sophistication of the technology of MSMEs. “
Volume is also a problem. According to Subrahmanya, less than 1.5 lakh MSMEs are exported from India – a fraction of the 6.3 crore MSMEs in India. So a significant portion of MSMEs need to be integrated into the global market and then into GVC, he said.
Market access and ecosystem support
The development of GVC is to enable exports which means to improve production in general. However, there are ecosystem problems for MSMEs due to lack of accurate information, capital, access to foreign markets, etc. Mohammad Athar, PWC India Partner and Leader Industrial Development, says that MSMEs in India are reluctant to use industrial estates and parks in various states because they do not have sufficient capital to build their own units while the cost of compliance is too high. High for them.
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“To address this challenge, the MSME Ministry is considering bringing in smaller MSME parks. This means that if there could be ready-to-use facilities where MSMEs could rent space and become part of a larger production ecosystem without developing that ecosystem on their own, it would really help improve their productivity. This is needed by the government across key manufacturing clusters to develop the MSME ecosystem and allow global integration to take place, ”Athar said during the panel discussion.
According to Athar, another step taken by the state governments to help SMEs do business in the international market is the ‘Acceleration Service’. “It simply came to our notice then. In short, the opportunity is quite real and many companies have already merged with GVC. To enable greater integration and help MSMEs become more productive, trade costs, regulation and alignment of export ecosystems will be at the center, ”Athar said.
Change of mindset
Another challenge is the mindset of being a small business with limited management bandwidth and multiple issues which limits MSMEs from exploring their full potential for being part of GVC. Rama Shankar Pandey, who heads the business of Heller India, a German automotive lighting company, said MSMEs need to get out of this mindset of being mere suppliers.
“Being small doesn’t mean you can’t separate yourself and climb the ladder of technology. Scope is important but an organization may not have full access to supplies, products and services. The role of MSME is important here. In the last few years, for example, we’ve grown by producing ‘Uberizing’. We move forward in the value chain, investing in research and development (R&D) and design and development (D&D) to attract the best talent, and channelize OEM’s relationship with our access and talent to customers. When it comes to manufacturing, we promote our MSME ecosystem. The moment they do this, they become part of the value chain and gain the confidence to look for it, ”Pandey explained.
Creating the right mood
The panel included India’s first diamond-certified MSME Gillard Electronics Punjab and India’s automotive sector under the government’s Zero Defect, Zero Effect (ZED) project, which encourages sustainable production. Launched in 1961, Gillard is responsible for only 5-7 percent of the business of the export automatic switch maker, which ranks Honda and Mahindra & Mahindra among its more than 100 customers.
“Even though our exports are low, we are helping Indian companies to avoid imports through import substitution and contribute to the balance of trade in India. Moreover, after Kovid, I think the world is suddenly looking to India to buy different products. Even local Indian companies are coming to us for product development because they do not want to depend on China, ”said Sanjeev Singh, managing director, Gillard Electronics.
However, to succeed in exports, Singh says MSMEs need the right mood. Singh, for example, added that many MSMEs today do not use a system to document what they are doing, do not create a business plan or make a conscious effort to understand their strengths and weaknesses and where they want to go. He said that it is very important along with overall process management, logistics management etc.