MSMEs are key to Indian exports finds InGovern study

02nd July 2023
MSMEs are key to Indian exports finds InGovern study
India Import Export numbers

July 2, 2023:The MSME sector of India contributes around 33% of India’s total GDP and is predicted to contribute worth USD 1 trillion to India’s total exports by 2030. In the Budget 202324, the Ministry of Micro, Small and Medium Enterprises provided many facilities including extension of credit schemes, reduction in tariffs and duties on imports and exports to make it more affordable for MSMEs to participate in international trade among others.
 InGovern, a leading independent proxy advisory firm, released a report on "E-commerce Exports can propel MSMEs to New Heights."
Global Export Opportunity
According to UNCTAD, the global B2C e-commerce market was about USD 5 trillion in 2019.
Of this, B2C e-commerce international trade is about 9% and is growing each year.
Indian Exports

  • India’s overall exports are projected to scale new heights, growing at 13.84% during FY202223 to achieve USD 770.18 billion worth of exports. 
  • Merchandise exports have registered the highest ever annual exports of USD 447.46 billion with 6.03% growth during FY2022-23 surpassing the previous year (FY2021-22) record exports of USD 422.00 billion.
  • Services exports lead the overall exports growth and are projected to set a record annual value of USD 322.72 billion with growth rate at 26.79% during FY 2022-23. 
  • India’s Ministry of Commerce and Industry believes that an export target of USD 2 trillion is set to be achieved by 2027.
  • Achieving a USD 5 trillion economy requires about USD 1 trillion in merchandise exports, a large rise from current levels.
  • NASSCOM has estimated that the share of current online-led exports in total exports from India is likely to increase 45 times by 2030.

Indian exporters, largely MSMEs, must grab the opportunity when the global buyers are looking up to India to execute their China plus one strategy and de-risking their China reliance. To this effort, global ecommerce platforms like Amazon and Walmart/Flipkart can be allies of Indian exporters.
Amazon:  

  • The cumulative exports by Indian exporters on the Amazon Global Selling programme are expected to cross USD 5 billion.
  • Amazon has doubled its exports pledge, to now enable USD 20 billion in cumulative exports from India by 2025.
  • It estimates USD 125 billion worth of Indian exports being driven by e-commerce by 2030.
  • It has 100,000+ Indian exporters selling through Amazon Global Selling.

Walmart/Flipkart E-commerce Exports

  • Along with Flipkart and cross-border commerce company Payoneer, Walmart laid out a detailed roadmap for local sellers with export ambitions at the recent Walmart Global Seller Summit.
  • The roadmap is part of Walmart efforts to expand its sourcing from India to USD 10 billion a year by 2027.

Open Network for Digital Commerce (ONDC)

  • ONDC is a network based on open protocol and will enable local commerce across various segments, such as mobility, food order, hotel booking and travel, among others, to be discovered and engaged by any network-enabled application. It aims to create new opportunities, curb digital monopolies, support MSMEs and small traders and help them get on online platforms.
  • It is an initiative of the Department for Promotion of Industry and Internal Trade (DPIIT) under the Ministry of Commerce and Industry.
  • Though ONDC is being used for local e-commerce to compete against Amazon and Flipkart, it can be foreseen that ONDC may soon facilitate global exports.

For Exports, MSMEs can Leverage Amazon and Walmart/Flipkart

  • Given the global export potential and the impetus provided by the Indian government by FTP 2023, MSMEs should look towards global markets.
  • The increased accessibility to e-commerce has enabled MSMEs to actively participate in foreign markets and deepen their global footprint.
  • MSMEs should grab this opportunity and use Amazon and Walmart/Flipkart as a trusted partners to export.
  • MSMEs are already exporting around USD 2 billion using the Amazon Global Selling Programme, and Walmart/Flipkart has exports of over USD 3 billion.
    Exports through e-commerce is the next big leap for Indian MSMEs. We predict that Amazon will emerge as the strongest enabler to these MSME due to its scale. While ONDC continues to take tiny steps, it must go a long way to compete with marketplaces like Amazon. Global Selling is the next big leap for Indian MSME E-commerce sellers.