Governing council for MSME exports

Topics covered:

1. Development processes and the development industry the role of NGOs, SHGs, various groups and associations, donors, charities, institutional and other stakeholders.
2. Welfare schemes for vulnerable sections of the population by the Centre and States and the performance of these schemes; mechanisms, laws, institutions and bodies constituted for the protection and betterment of these vulnerable sections.
3. Inclusive growth and issues arising from it.

Governing council for MSME exports

What to study?

• For Prelims: Share of MSME in India’s GDP, classification of the sector.
• For Mains: MSME- significance, issues, challenges and solutions.

Context: Ministry of Micro, Small and Medium Enterprises (MoMSME) has released its Strategy Action Plan on Unlocking the potential of MSME exports.

Background:

Despite a reasonable growth story and substantial share in overall exports, MSMEs are often faced with challenges that restrict their entry into the foreign market. Not only do these challenges need to be  studied  in  detail  but,  an  eco-system needs to be created in such a way that  these  enterprises  shall  be  able  to  participate  in  the  global  value  chain  on  its  own  and  generate  enough  economies  of  scale.

Highlights of the strategic action plan proposed:

Aim: The strategy  action  plan  prepared by the Ministry aims  to create  a  sustainable  ecosystem  for  entire  MSME  development.  

The action plan aims to achieve the objectives of – Finance; Access to affordable trade finance; Target of USD 100 billion of exports from India by 2020; Evaluate readiness of MSMEs to export their products and services; Recognize areas where improvements are  required  in  order  to  be  able  to  export  effectively and efficiently; Integration of MSMEs into Global Value Chain.

Governing Council: To ensure efficient and effective  delivery  of  all  MSME  export  related  interventions,  the Strategy Action Plan proposed  to  formulate  a  governing  council  that  shall  be  chaired  by  Secretary,  M/o  MSME  and  Co-chaired  by  DC,  M/o  MSME.

Composition: The council  shall  comprise  of  senior  officials and members   from   M/o   MSME,   Commerce,   MSME Export   Promotion   Councils,   Export  Development Authorities, Commodity Boards, and other bodies.

Problems and challenges faced by the sector:

• Limited information about products & services.
• Working of  the  foreign  markets,  and  in  particular  difficulties  in  accessing  export  distribution channels and in connecting with overseas customers.
• Lack of  awareness  on export  promotion  and  assistance  programmes  offered  by  the  government and unfamiliarity  with  legal  and  regulatory  frameworks  of  the  exporting  and  importing  countries are another issues identified in the Strategy Action Plan.
• No or  zero  awareness  on  IPR  issues  and  various  International  Trade  Agreements  (ITAs).
• Access to affordable trade finance; Costly product standards and certification procedures; Logistics cost –airport and shipping costs etc;
• Technology; Lack of   innovation,  low value  addition  and  poor  packaging  due  to  low  level  of  technology adoption are some other problems identified.

Need of the hour:

The need of the hour is to study challenges in  detail and create an  eco-system in such a way that  these  enterprises  shall  be  able  to  participate  in  the  global  value  chain  on  their own  and  generate  enough  economies  of  scale.

Sources: the hindu.

Mains Question: For MSME sector, access to credit is one of the most significant challenge amongst the several challenges that the sector faces. Analyze issues related to credit availability for MSME sector and the role government is playing?