The most current statistics indicate that the MSME (Micro, Small and Medium Enterprises) sector contributes just over 48% of all Indian exports. The combined exports that originate from the MSME sector are worth nearly $150,000 million. However, many Indian MSMEs lack competitive infrastructure on a global scale, which is why the Central Government has set up an Export Promotion Cell.
The main objective for the Promotion Cell is to help Indian MSMEs maintain a lead over similar organizations from other countries. One of the primary hurdles that many smaller Indian manufacturers face is a lack of funding. However, when they gain success in exports, the chances of receiving payments on time increases, thus decreasing funding bottlenecks.
A governing council to manage the MSME sector will also be set up under the Export Promotion Cell. Since certain export-worthy goods including leather products, sports goods, and readymade garments are manufactured mostly by such smaller enterprises, they stand to gain the most if MSME loan interest rates come down. With lower interest rates comes the ease of repayments.
The current MSME scenario
Based on the most recent studies and statistics, the growth of MSMEs in India is very robust. It has provided sustainable employment to numerous Indians. Besides, the MSME sector in India contributes 29% of the Indian GDP, according to FY 2018-2019 figures. The Government has also hosted a series of summits stressing on what are the benefits of MSME loans.
Most financial institutions including NBFCs have a number of MSME business loans in place. These loans are meant to cover the short-term liquidity challenges which almost every start-up faces.
Overall, the future of the MSME sector in India is also bright considering the Government is also stressing on developmental aspects. The new Export Promotion Cell will help the MSME ecosystem keep up with global trends.
The government has set a goal of pushing the Indian economy across the $5 trillion marks by 2024. It is expected that several boosts, including lower MSME loan interest rates, will be provided so that adequate growth is generated. The sector is expected to provide 50% of the GDP by 2024.
What will the Export Promotion Cell do?
The Ministry of MSME has recently stated that the EPC will have a governing council which will be chaired by the MSME Ministry secretary. Co-chairing the council will be the ministry’s development commissioner.
Here are some of the other agendas that the EPC is expected to follow.
- Help MSMEs participate in global exhibitions and trade fairs: There are many international trade fairs which are held every year. Before the EPC’s formation, smaller enterprises could not attend these international fairs because of either ignorance or lack of funds. Both these problems will be addressed by the Export Promotion Cell.
- Aid in arranging for credit: MSME business loans are the primary means to avail credit. The MSME loan is the most effective financing solution for MSMEs. The EPC will work closely with all types of financial organizations to help small and medium enterprises procure credit.
- Training on several aspects of exports: Exporting a product involves benchmarking certain parameters like quality, preservation of goods, packaging and transportation facilities. The packaging aspect is the most difficult one. Seminars will be held for bar-coding techniques, the standardised international packaging, and other issues. Some MSMEs may require a small MSME business loan to kickstart the packaging program which they can avail from financial establishments.
- Arranging awards for outstanding organizations: The EPC will also establish a National Award for Quality Products which will recognize the best small and medium enterprises. Organizations from all states and UTs can participate in this organization. Concessions on MSME loan interest rates may also be forwarded to extraordinary performers.
Financing is among the most important challenges for MSMEs targeting business growth. Both government-backed and private financing options now provide multiple options for MSMEs to achieve their growth curves.