MSMEs Exports through online retail platform: Policy Challenges


The Indian economy has consistently been showing the signs of growth, with the average GDP growth rate at 7.5% in the year 2015-16. The retail sector is showing a promising trend of 11% CAGR, growing from an estimated size of USD 600 Billion now to USD 1 Trillion in 2020. MSMEs account for more than 95 per cent of total industrial units in India. However, only limited number of MSME clusters having potential and readiness for CBT. To capitalize on the benefits from specific target customer base, clusters may be   classified as export-oriented in the selected category of products. There are few CBT categories like textile, apparel, leather, handicraft, gems and Jewellery concentrated in few clusters. It is therefore essential to map e-commerce (CBT) readiness to have focused and project based targets for CBT among MSMEs. Though, the e-Commerce spend in India accounts for less than 2% of the total retail spending, e-Commerce has become a key driver to create new markets in erstwhile unreachable geographies.

E-Commerce wave is here. The change what E-Commerce brings is immense. Traditional impediments to doing business are being shattered; existing industries are losing preeminence, the Government is trying to adapt to new forms of trade by rolling out schemes and new policies. For MSMEs, this new era of E-Commerce CBT provides both opportunities and risks. As in this newly interconnected global environment, both large and small businesses face a clear choice: either to become a part of this wave of change or the risk of falling behind and losing the opportunities For those that do not, it will be a tsunami of creative destruction. Adoption of this new trade method means having access to a large number of new customers whereas failing to adopt it means extinction and irrelevance. The choice is of MSMEs: they can either ride the wave of e-commerce prosperity or risk being left behind.

It is therefore necessary to impact on ecosystem and to create a complete readiness for e-commerce.

The Government policies play a significant role in shaping any sector of the Economy. Based on a comprehensive literature review and findings of the primary survey major bottlenecks limiting the success of Indian MSMEs have been identified. Policy Challenges like customs related issues (limitations under the courier regulations), MEIS Policy benefits limited to certain sectors, challenges faced in claiming the MEIS benefit, absence of mechanism of returned consignment exported via online mode, no provision for refund of taxes, etc are hampering the growth of MSMEs in doing E-Commerce transactions.

With Internet being the pillar of E-Commerce Industry; it is considered a prime issue hampering its growth. Issues identified under this head are the high cost incurred in embracing technology, lack of awareness about benefits of this technology and lack of knowledge about the MSMEs doing successful E-Commerce CBT. Poor ICT Physical Infrastructure like low bandwidth, speed and reliability of the network and power failure in rural areas, perception issues about faster offline recovery, etc. force them to stick to their traditional mode of business. Lack of skilled manpower, privacy and security concerns, inaccessibility to finance are some of the roadblocks preventing their transition to the E-Commerce.

Indian MSMEs trapped in their cash ecosystem are unable to upgrade themselves to E-Payment methods. Poor knowledge and awareness on how to operate computers and the functionality of online business prevent their E-payment adoption. Age, skills, educational qualification of the entrepreneur are the factors which play a vital role in its adoption and is missing in a large number of MSMEs. The recurring snag in the payment gateway causing transaction failure is one of the factors diminishing the credibility of Indian MSMEs in front of the International buyers.

In this new interconnected global environment, Logistics lies at the heart of E-Commerce. The development of this sector defines the future direction of Cross Border E-Commerce Trade. Different problems cited by the MSMEs are the long distance issues which increase the cost of delivery to the extent that it surpasses the actual cost of the product, high shipping costs, lack of tracking options giving rise to the trust issues, issue of small volume of goods in E-Commerce transaction and weak and inefficient local supply chain infrastructure.

Taking into account the different challenges faced by the MSMEs and different opportunities for growth present in CBT E-Commerce . Inclusion of more sectors with high RCA values under the MEIS Policy, defining a provision of returned goods to avoid any duty payment, public-private logistics integration, raising the de-minimis threshold, implementation of digital single window system, highlighting the success stories of MSMEs doing E-Commerce CBT, strategic linkages with local support organizations, mainstreaming local associations into digital E-Commerce, etc. will help in boosting the MSMEs Export presence.

Creation of a more structured and information-driven process to help MSMEs in cross-border trade is necessary. Thus, it is imperative to create an ecosystem to support Indian MSMEs to come forward and adopt E-Commerce to grow their business.

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Rajveer Singh is a local economic development expert. Working with MSMEs for the last 30 years. He specializes in bottom up approach and successfully applied the concepts in National, Regional and Global value chains. He is an expert in action research, in industrial and rural clusters .