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Opinion

Expectations from trade-tech in 2022

12/01/2022 5 Min Read

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Till a few months ago, the business world, including exporters, manufacturers, and numerous others badly hit by covid and its subsequent lockdowns, had been looking forward to resuming business as per normalcy in 2022. Everyone believed that the worst was behind us. Unfortunately, Omicron put an end to that.

Now, as India prepares to tackle this strain, there’s much uncertainty in the industry circles over whether we will undergo another lockdown. And, if so, will the restrictions on movement again hamper trade and economic activities. Even as we await definite answers, the trade and tech community still believes that the dawn of 2022 will resolve some long-standing systemic issues gripping the sector.

Digital Documentation

To begin with, the industry highly anticipates greater digitisation of paperwork. Before the pandemic, exporters had to deal with a vast amount of documentation, much of which also involved conducting in-person meetings with various officials. Then, such conventional procedures were hit due to the lockdown and social distancing norms. And that resulted in shipment delays till the paperwork was resolved.

The government realized the intensity of the issue early on, and to tackle the problem; it decided to fast-track electronic trade documentation. However, this has given rise to other challenges, including technology failure. For one, small exporters still face issues accessing the Directorate General of Foreign Trade (DGFT) portal. While some have connectivity problems, others are unable to digitally sign documents, which is the DGFT mandate to validate the e-documentation.

The aim of going digital is laudable and should help in the ease of doing business. What needs beefing up is the implementation– and a robust technology back-end. Exporters hope this change will happen in 2022, buoyed by good numbers in 2021.

Supply Chain Linkages

A significant impact of the pandemic and the lockdown was the transition to digital platforms for everything from shopping to payment. Essentially, e-commerce became the gateway to digitisation for many. What e-commerce has also done is literally open borders to buyers and sellers. Small businesses have been able to sell in a far larger marketplace compared to traditional retail or even B2B selling.

But, the scale and reach of e-commerce exports are unmatched, especially for the Micro, Small & Medium Enterprises (MSMEs). The e-commerce supply chain is far more robust than any individual small exporter can manage. Among other things, exporters have been asking for the foreign trade policy to allow for lower entry barriers for e-commerce exports. The idea is to enable MSME manufacturers and exporters to extend their market reach through the e-commerce supply chain. This, say, experts, could also be one major piece in India becoming a US$ 5 trillion economy.

Seamless Cross-border Processes

Red tape, rules and regulations, vast amounts of paperwork– these are the things we generally associate with any kind of cross-border trade transaction. These factors deter several MSME manufacturers from tapping the export market. Successive governments have tried to simplify the process by removing complicated systems of levies and cesses, to name a few. But, these measures have met with varying degrees of success. Exporters want cross-border trade to become seamless and hassle-free, that too quickly.

The Regional Comprehensive Economic Partnership (RCEP) could have helped India achieve this. Although India was an essential part of this trade bloc, the nation walked out of it in 2019 because of fears that free exports and imports would hurt domestic producers. However, some experts believe that not being part of such a strong trade bloc could hurt India’s leverage in the global marketplace. The government is now trying to ink free trade agreements with several countries on a one-on-one basis. If there exists enough of these deals, exporters will be in a better position to compete globally.

Access to Credit

Limited access to funds is a long-standing issue despite the government and private players getting involved. Even pre-pandemic, fintech was seen as the answer to the funding challenge that dogged small exporters. Post-pandemic, the idea of using technology to perform due diligence and credit checks has become more attractive. Fintech companies offer low-cost credit, and because they can identify good and bad risks using technology, they are able to lend without demanding collateral.

However, private fintech is still only a tiny part of the solution. What is needed is a far greater focus on government loan schemes such as the Pradhan Mantri Mudra Yojana, the 59-minute business loan scheme, Stand Up India, and SMILE.

Conclusion

These are just a few of the pain points that the trade-tech sector hopes will be eased this year. Even as India gears up to fight the latest covid-19 strain, much of the country believes economic activities won’t be drastically impacted. And while business goes on, perhaps it’s time to improve some aspects of it.

The article was first published on vc-world.in

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Pushkar Mukewar

CEO/Co-Founder at Drip Capital

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