Scaling up MSME exports

  • Industry News
  • Jul 29,22
With all the policy stimulus and rapidly changing geo-political scenario, the share of MSMEs in India's export kitty is expected to scale up manifold in the coming years.
Scaling up MSME exports

Recently, while replying to a question in the Rajya Sabha, the Minister of State for MSMEs Bhanu Pratap Singh Verma, stated that the share of micro, small and medium enterprises (MSMEs) sector in the country’s annual merchandise exports declined in 2021-22, which witnessed a record high level of exports. While MSMEs' share in exports declined to 45.04 per cent in FY22 in comparison to 49.35 per cent during FY21, India’s exports jumped 44.5 per cent from $291.8 billion in FY21 to record $421.8 billion in FY22.

According to Ajay Sahai, Director General & CEO, Federation of Indian Export Organisations (FIEO), the overall share of MSME exports has come down in FY22 because MSMEs are not the key players in exports of commodities (like petroleum, steel & other metals, food grains, etc) - which witnessed phenomenal jump in exports at higher valuation. Now with commodity prices dipping, this anomaly is expected to see a correction in FY23. Besides, with the change in MSME definition and technology infusion into the sector, MSMEs’ share in exports is expected to bounce back this year.

On a positive note, though the share of MSMEs in exports dipped in FY22, MSME exports have witnessed strong growth in absolute value. MSME exports surged by 32 per cent to $190 billion in FY22 compared with $143.9 billion in FY21. One of the main reasons for this growth is the China Plus One strategy adopted by multinational companies (MNCs) who are diversifying their procurements from China to other countries - benefiting Indian MSMEs. Engineering goods sector has been a major beneficiary of this trend. India's engineering goods exports witnessed an increase of 13.5 per cent to $9.79 billion in May 2022 from $8.62 billion in May last year, as per Engineering Export Promotion Council of India’s data.

With all the policy stimulus and rapidly changing geo-political scenario, the share of MSMEs in India's export kitty is expected to scale up manifold in the coming years. The rising contribution of MSMEs augurs well for the government, which is targeting $1 trillion in exports by FY27. According to a recent Bain & Co report, chemicals, pharmaceuticals, electronics, automotive, industrial machinery, and textiles are expected to play a key role in propelling manufacturing exports to reach $1 trillion. Production Linked Incentive (PLI) schemes - aimed at attracting large investments across manufacturing sectors – is expected to improve capacity utilisation, increase manufacturing gross value added and boost sales across 13 key sectors, resulting in an overall rise in exports. The PLI outlay of $47.8 billion planned over five years, starting in 2021, has increased in-country production and helped manufacturing-led exports.

India, which is now the sixth-largest manufacturing economy in the world, is on the cusp of structural shifts in the industrial sector. With a high impetus on supply chain diversification, leading global players are setting up their manufacturing bases in India. Despite possible recessionary and inflationary pressure, fundamentals for India’s manufacturing sector remain strong.

The Next Edition of IPF will feature India's Top Engineering Firms to recognise their contribution to the country’s growth engine. In addition, in October 2022, IPF will bring out the 4th Edition of “Smart Manufacturing” supplement to provide insightful information and practical tips for implementing latest smart technologies for improving manufacturing efficiency.

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