foreign trade policy: how an effective trade policy can help MSMEs spread their wings

The pandemic has touched many lives and the world has been dealing with it for a year now. A report by Nomura India Business Resumption Index suggests that the second outbreak is expected to slow the country’s economic recovery.

Against this bleak backdrop, the stimulative power of exports cannot be underestimated. Focusing on increasing India’s participation in international trade reflects the vision of Atmanirbhar Bharat. Earning foreign exchange helps reduce the trade deficit and has a direct impact on GDP. This has a positive impact on economic growth. Exports also generate jobs that are needed at a time when the country just posted an unemployment rate of 6.9%. The forthcoming Foreign Trade Policy (FTP) which is planned for 2021-2026 will not only provide short-term relief from the consequences of the pandemic, but will also provide a solid footing in our mission to achieve a $5 trillion economy. by 2025 and $1 trillion. thanks to the digital economy.

The participation of micro, small and medium-sized enterprises (MSMEs), self-employed and entrepreneurs is vital for the growth of the country’s exports. Foreign exchange earnings from these small businesses are transmitted quickly into the local national economy, creating a cycle of local demand, contributing to GDP growth. Therefore, it is prudent that our trade policy focuses on encouraging SMEs to expand their opportunities to go beyond national borders, increase the competitiveness of local brands and position India as a leader. in the world market. Here are some considerations inside and outside the scope of FTP to ensure strong export performance over the next five years.

Leveraging India’s Strength in Low-Value Goods and Services Exports

This is an opportune time for small commodity exporters. With the growing adoption of e-commerce, the floodgates to purchase bespoke products from anywhere in the world have opened. In fact, a recent NASSCOM report pegs e-commerce exports at US$125 billion by 2030. This bludgeoning with low risk and investment gives a major boost to our MSMEs, which is why the new policy should consider expanding the support needed to enable artisans of tribal products, handicrafts or small exporters of gemstones and jewelry to take advantage of global B2C demand. This will result in increased employment in the manufacturing sector.

Services and service exports are India’s strength. The pandemic has had a huge impact on travel, paving the way for remote work, education and online entertainment. India is one of the biggest markets for freelancers. Demand for their low-value digital services in software, education, wellness, market research, etc. is booming with the potential for double-digit growth each year. Another advantage of this situation is the rise of female entrepreneurs in the country. For example, a passionate housewife trained in Indian classical dance or yoga finds it relatively easy to teach a global audience from the comfort of her home. India’s diaspora of over 16 million people is a clear target audience for remote services. These low-value services have the ability to improve India’s resilience, so naturally the new FTP must facilitate B2B and B2C commerce.

One solution is to speed up GST refunds to increase the ease of doing business and have sustainable business models. Another way may be to introduce changes in the Export Services Scheme of India (SEIS) and include incentives for small value services up to Rs 5 crores.

Creating a win-win for MSMEs and freelancers – introducing a talent portal for digitization

Digitization is imperative for MSMEs to survive and thrive, but it is often a difficult task. The biggest challenge is finding affordable, qualified talent to manage the digital transformation of core business functions and processes such as website, SEO/SEM, purchasing, supply chain, marketing, etc. MSMEs cannot afford to attract and retain the talent needed to operate. an omnichannel digital company.

On the other end of the spectrum, the country has an enviable base of freelancers with expertise in these fields. Clearly, they are the answer to the talent management problem faced by MSMEs. Policy can develop a talent portal based on a pay-as-you-go model. From digital and social media marketers to website developers, SEO experts and shopping cart improvement specialists can be listed on the portal to provide MSMEs with access to skilled talent without incurring fixed costs, while seamlessly increasing their exports. It also proves beneficial for freelancers by ensuring sustainable business opportunities.

Amend the MSME law to include merchant trade exports

The government has introduced various incentives for MSMEs over the past year to enable small businesses to weather the crisis effectively. Unfortunately, under the MSME law, only producers can benefit, while merchant trade exports are excluded from the definition. This issue needs to be resolved and the definition needs to be broadened to ensure that merchant trade exports are eligible for the same benefits.

The next few years will be crucial in laying the foundations for growth, and international trade in low-value goods and services will play an equally important role in achieving this. India’s foreign trade policy should open up new avenues for small businesses and freelancers to expand their presence beyond the country and reach global consumers. With key changes to incentives and definitions and the implementation of a talent platform, India can leverage structural changes in global trade to become a winning leader. This will result in short and long term economic benefits for the country.

(The author is Director, Corporate Affairs, PayPal India)

(The one-stop destination for MSMEs, ET RISE provides news, views and analysis on GST, exports, finance, policy and small business management.)

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