India’s MSMEs must leverage e-commerce exports to unlock global markets: FISME and IKDHVAJ Study

The newly released Foreign Trade Policy (FTP) 2023 has laid special emphasis on giving a fillip to e-commerce exports. Over 90% of e-commerce exporters in India are MSMEs. However, there is a need to spread awareness and empower MSMEs to sell their products in the global markets through e-commerce channels. In line with this, FISME (Federation of Indian Small and Medium Enterprises) and IKDHVAJ Advisers LLP conducted detailed research to identify policy changes to give a strong push to e-commerce exports.

The report outlines concerns faced by MSMEs around how e-commerce exports face high return rates as customers are unable to examine products beforehand. Returns are treated as imports and face import duties, resulting in high logistics costs and product disposal. Additionally, MSMEs lack digital skills and information on support tools, and there’s no comprehensive guide to e-commerce export procedures. For the concerns highlighted, the report indicates the below recommendations and solutions:

Information and procedural issues

• A tripartite awareness raising campaign involving Industry and SME associations such as FISME, government and platform owners to facilitate information on end-to-end e-commerce export process.
• Facilitative mechanisms for processes such as the issue of mandatory licenses and registration at the Port.
• A green channel for e-commerce exports with easier documentation and customs process simplification, for timely delivery.
• Standard operating practice for product returns, including avoiding levy of import tariffs on the returns.
• Access to information and benefits available under government schemes for exports.
• Special facilitative mechanisms on cross-border payments.

Reducing costs of e-commerce exports

• Lowering charges for Export Data Processing and Monitoring System (EDPMS).
• Easier reconciliation of remittances for export receipts from abroad through a reassessment of the current 25% variation between exports and payments.
• Raising the 9-month limit on receiving payments for exports for e-commerce.
• Enhancing the role of post offices and especially FPOs in facilitating end to end logistics.
• Exploring closed loop payment mechanisms with countries where India has initiated rupee payments.
• Learning from successful practices of other countries.

Speaking on this, Anil Bhardwaj, Secretary General, FISME, said “E-commerce market size in India has reached approximately $38.5 billion in 2020, it is expected to reach $99 billion by 2025. This presents an opportunity for MSMEs to tap into e-commerce exports and help gain access to global markets and customers.”

Dr. Veena Jha, CEO, IKDHVAJ Advisers highlighted, “E-commerce exports present millions of entrepreneurs and small businesses with new opportunities to access global markets. However, there are still a slew of measures related to additional compliance burden, payments, return of products, among others that the Government can take to unleash the potential of e-commerce exports for MSMEs.” Mushtaq Ali, an e-commerce seller, echoed similar thoughts on how e-commerce has enabled MSMEs to access global value chains, expanding their market reach and attracting new customers.