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Opinion

How e-commerce policy focused on exports can help MSMEs compete globally

20/12/2021 4 Min Read

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The commerce minister’s recent draft amendment to the consumer protection (E-commerce) Rule 2020 has caused a stir among prominent circles- other ministries, existing e-commerce players, and prospective buyers/sellers. What was touted to protect the cause of Indian companies is now being seen as difficult-to-implement. For instance, the proposed clauses of e-commerce companies to limit associated enterprises to list as sellers on their own platform has added compliance requirements. Moreover, the ban on flash sales of select products at lower-than-market prices has caused industry stakeholders to raise caution.

The US-India Business Council and the US-India Strategic Partnership Forum have also flagged concerns on the proposed e-commerce rules on clauses such as the country of origin, mis-selling, registration of e-commerce entities, fall-back liability, and the appointment of personnel already mandated under the new IT rules.

While the e-commerce policy is still in the consultative stage and was opened only for comments briefly earlier this year, the time is ripe to concentrate on e-commerce exports driven by the 6.3 crore Indian MSMEs, who are the economy’s backbone.

Factors making e-commerce exports easier for MSMEs

Giving Indian MSMEs easy access to international markets could be a reality driven by three main aspects:-

Shift in consumer preference amid covid-19

The covid pandemic has encouraged consumers worldwide to adopt online purchases of day-to-day items vis-a-vis select products that were earlier more popular on e-commerce websites. This opens the doors for Indian-made products to reach a broader consumer base, not necessarily of big enterprises alone but even MSMEs.

Rejig of the global supply chain amid the US-China trade war

A positive result of the ongoing US-China trade war can be the entry of Indian MSMEs geared with quality products that can compete with global standards and pave their way into international marketplaces. Educating MSMEs on global value chains and quality compliance would further help them leverage the e-commerce platform to grow their business.

Make-in-India initiative

With the Narendra Modi-led government pushing for Make-in-India products, there is an increased interest in what’s on offer in India, how certain products can locally be produced cheaper and yet meet global standards, the prospective large-scale production of certain goods and how it could work towards getting MSMEs access to international marketplaces. This will help MSMEs go beyond their conventional pools to scale and expand to multiple geographies.

What aid is needed to propel MSMEs towards e-commerce exports?

Easy access to capital

The first step for MSMEs to produce goods to meet global standards is easy access to working capital. The government’s initiative to encourage banks and non-banking financial companies to facilitate lending to MSMEs is a step in the right direction. However, this initiative needs to be further strengthened by adopting innovation in raising capital.

One way of achieving this is to use the modern approach that fintech firms bring to the table while providing working capital solutions. Making trade financing easy, accessible and hassle-free has to be the top priority to help MSMEs participate in cross-border trade.

Technological adoption

Without an end-to-end digitization of the exports process, the MSMEs’e-commerce exports cycle is unlikely to be seamless. From raising capital via fintech companies, embracing paperless invoicing, payments and settlements, to taking orders, dispatching finished goods, understanding the marketing efforts, compliance issues, honoring contracts etc., everything needs to be digitally adopted by MSMEs. Besides this, they need to be protected against cyber malpractices, for which technological education is pertinent.

Logistical hand holding

For e-commerce exports by Indian MSMEs to be a reality, logistical hand-holding by the government is significant. This would involve a high efficiency of goods being dispatched/received and the knowledge on the dos and don’ts that local compliances in each foreign country would need to follow. In short, MSMEs need a 360-degree hand-holding of the government to increasingly interact with multiple global destinations.

Conclusion

To date, larger corporations have effectively conducted export trade to many countries as most transactions have been offline. With the democratization of trade that has opened the doors to e-commerce, opportunities have grown multifold. This is a timely opportunity for the Indian government to pivot their growth-hungry MSMEs to a global audience. The e-commerce policy framework of India needs to embrace the opportunity of a level-playing field to benefit the country’s MSMEs and put them on a new growth trajectory.

The article was first published on vc-world

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