Context: The Indian government is considering the establishment of a global trade promotion body aimed at boosting exports from Micro, Small, and Medium Enterprises (MSMEs).

Need

• The move comes on the backdrop of India's rising trade deficit and the urgent need to boost exports.

• There has been a demand and also a consideration for a trade promotion body that would have offices abroad and work hands-on in terms of promoting exports for MSMEs who do not the economic muscle to promote their goods and establish a market abroad on their own.

• Although there are sector-specific trade promotion bodies in the country along with the India Trade Promotion Organisation (ITPO), they do not have a robust presence globally and mostly work out of India.

Key-Highlights of the Proposal

• Proposal Title: Global Trade Promotion Organization (GTPO)

• Objective: To enhance MSME exports and address India’s rising trade deficit.

• Inspiration: Modeled after the Japan External Trade Organization and the Australian Trade and Investment Commission.

• Structure: The GTPO will have branch offices in major global economies.

• Functionality: It will assist MSMEs with registration, licensing, and certification for exports, and facilitate business opportunities in collaboration with Indian consulates abroad.

Reasons Behind the Initiative

• Trade Deficit: India's increasing trade deficit necessitates a strategic approach to boost exports, particularly from the MSME sector.

• Lack of Global Presence: Existing trade promotion bodies lack a robust international presence, which limits their effectiveness in promoting MSME exports.

• Economic Muscle: MSMEs often lack the resources to market their products internationally, and a dedicated trade promotion body can bridge this gap.

Expected Benefits for MSMEs

• One-Stop Solution: The GTPO will provide comprehensive support to MSMEs, from export documentation to market access.

• Increased Exports: By facilitating participation in global exhibitions, trade shows, and buyer-seller meets, the GTPO aims to increase MSME exports significantly.

• Economic Impact: Enhanced exports will contribute to reducing the trade deficit and boosting India's GDP, given that MSMEs contribute about 45% to the country’s total exports.

Challenges and Considerations

• Coordination: Effective coordination between the GTPO and various government ministries is crucial for the success of the initiative.

• Global Competition: Indian MSMEs will need to compete with well-established global players, necessitating high-quality products and competitive pricing.

• Sustainability: The GTPO must ensure sustainable growth for MSMEs without compromising on quality and ethical standards.

Broader Implications

• Employment: Enhanced MSME exports can lead to increased employment opportunities, supporting over 110 million people currently employed by the sector.

• Sectoral Growth: Specific sectors like handicrafts, textiles, ayurveda, leather goods, and imitation jewelry, which have significant global markets, can see substantial growth.

• Economic Diversification: Diversifying export markets will reduce reliance on a few countries and spread economic risk.

Required Measures for Effective Implementation

• Policy Support: The government must provide continuous policy support, including financial incentives and simplified regulatory processes.

• Capacity Building: Training and capacity-building programs for MSMEs will be essential to enhance their competitiveness in global markets.

• Monitoring and Evaluation: Regular monitoring and evaluation of the GTPO’s performance will ensure that it meets its objectives and adapts to changing market conditions.

Why MSMEs are important

• MSMEs are a key constituent of the Indian exports ecosystem, contributing about 45% to the country's total exports, according to a Global Trade Research Initiative (GTRI) report. They also account for around 38% of India's manufacturing output.

• MSMEs also contribute about 27% to India's GDP and employ more than 110 million people, making it the largest employer after agriculture (about 148 million employed, according to GTRI).

• As per NITI Aayog report on MSME exports they said "Exports represent an enormous and under-utilized opportunity for the MSME sector. Sectors where Indian MSMEs can participate and compete in export markets include handicrafts, handloom textiles, ayurveda and herbal supplements, leather goods, imitation jewellery and wooden products. Globally, these sectors constitute substantial markets exceeding $340 billion, whereas their domestic market is considerably smaller."

Schemes for MSMEs

• The Ministry of Micro, Small and Medium Enterprises implements various schemes for the growth and development of MSME sector and training and market assistance to MSMEs. The schemes/programmes inter alia include

1. Prime Minister’s Employment Generation Programme (PMEGP)

2. Credit Guarantee Scheme for Micro and Small Enterprises (CGTMSE)

3. Micro and Small Enterprises-Cluster Development Programme (MSE-CDP)

4. Entrepreneurship Skill Development Programme (ESDP)

5. Procurement and Marketing Support Scheme (PMS)

6. National SC/ST Hub (NSSH)

Road Ahead

• Noting that over time, small firms have encountered difficulties in tapping into export markets due to the inherent obstacles posed by economies of scale, the report said that it's more challenging for small enterprises to enter foreign markets, adhere to compliance requirements, achieve cost-effective production, and efficiently manage logistics for clients.

• Exporting is crucial for Indian MSMEs to break away from dwarfism and unlock their true growth potential. Exporting can allow 54 lakh (5.4 million) manufacturing MSMEs to tap into new markets and expand their customer base, leading to increased revenue and profit.