CURRENT AFFAIRS FOR UPSC IAS

Niti Aayog has called for easing of access to export finance and a concerted push to boost e-commerce exports to realise the potential of the country’s micro, small, and medium enterprises (MSMEs).

1: Dimension- Significance of MSME

• The Micro, Small and Medium Enterprises (MSMEs) sector plays an important role in the growth of the Indian economy. The share of MSME Gross Value Added (GVA) in All India Gross Domestic Product (GDP) is around 30%.
• In developing countries like India, where majority of the population resides in the rural areas, these MSMEs are crucial - socially and economically.
• Because, these enterprises are wide dispersed across rural areas, they are extremely important for rural economic development.
• Further, these enterprises play a key role as a place for entrepreneurship and business skill development, especially in rural areas due to their easy accessibility.

2: Dimension- Issues faced by MSMEs (highlighted by NITI Aayog)

• Constant obstacles: The Aayog said small firms have encountered difficulties in tapping into export markets due to the inherent obstacles posed by economies of scale.
• Cumbersome compliance process: It proves more challenging for small enterprises to enter foreign markets, adhere to compliance requirements, achieve cost-effective production, and efficiently manage logistics for clients.
• Lack of access to finance is regularly seen as a key bottleneck for MSMEs.
• India has not been able to tap into e-commerce to work around market access barriers, unlike China. In 2022, China’s e-commerce exports by MSMEs were worth $200 billion, which is 100 times that of exports by Indian MSMEs.

3: Dimension-Measures to catalyse a radical transformation of MSME

• Seamless Process: There is need of modifying the business environment to facilitate seamless exports through e-commerce platforms, coupled with addressing essential ease-of-doing-business factors.
• Green Channel: As part of six key recommendations, Niti Aayog called for "green channel" clearances of MSME e-commerce exporters.
• Better access: For better access to finance, there is need of promotion of Export Credit Guarantee can help improve working capital availability for MSMEs.