Need for a firm e-commerce framework in India’s upcoming Foreign Trade Policy to propel towards becoming an export led economy

Need for a firm e-commerce framework in India’s upcoming Foreign Trade Policy to propel towards becoming an export led economy

Need for a firm e-commerce framework in India’s upcoming Foreign Trade Policy to propel towards becoming an export led economy

India is home to over 6.3 crore MSMEs, contributing nearly 40 percent of overall India’s exports and about 29 percent towards the country’s GDP through national and international trade. While it has been identified by the Hon’ble Prime Minister and the Union Commerce Minister that exports will be a key pillar for India’s economic recovery and subsequent growth in a post COVID 19 landscape, there is a need for an enabling policy framework for e-commerce exports that will enable MSMEs to start exporting with lower entry barriers. Such exports are a potential pathway to a USD 400 billion market, taking India a step closer towards its vision of becoming ‘Atmanirbhar’. The upcoming Foreign Trade Policy will be critical for defining a policy framework for ecommerce exports.

E-commerce exports enables MSMEs to attain global recognition, whereby foreign customers can be directly reached with minimal upfront costs. It also facilitates use of pre-established supply chain efficiencies put in place by e-commerce marketplace operators. The upcoming Indian Foreign Trade Policy (FTP) provides the basic framework of policy and strategy for promoting exports and trade. Given the unique challenges of e-commerce exports such as cross border transactions, international deliveries, and returns, ecommerce exports need a dedicated chapter in this policy. It will play a critical role in helping domestic MSMEs go global, and integrating these MSMEs deeply into global supply chains

The revised Foreign Trade Policy (FTP) is expected to come into effect from April 1, 2022. To drive discussion around the same, Empower India organised a virtual session on “Encouraging MSME exports through E-commerce in the upcoming Foreign Trade Policy” to highlight the relevance of an inclusive FTP for the growth of India’s MSME sector and recommend changes that should be integrated into the Foreign Trade Policy 2022. Speaking at the session, Mr. Dhanendra Kumar, IAS- Former Chairman, Competition Commission of India and Executive Director, World Bank said that, “There is a need to work towards skill upgradation of the workforce in the logistics sector and adoption of technologies like AI and cloud computing which can further help improve logistics operations.” He also added that “E-commerce is going to be the pipeline through which MSMEs will have access to global markets. We need to look at digital inclusion, especially in Tier 2 and Tier 3 cities to enhance connectivity.”

Mr. Vinod Kumar, President, India SME Forum stated, “E-commerce platforms have made MSMEs more competitive, allowing them to innovate rapidly and expand their businesses. There is a need for an FTP which enables exports while focusing on development of the digital economy and technology driven exports.”

Dr Arpita Mukherjee, Professor, ICRIER, highlighted that MSMEs in India account for half of the country’s exports, contributing over one-third of India’s GDP today. India cannot afford to miss having an ecommerce framework in FTP and achieve the target. Any further delay can set us back from the leadership position that we are heading towards in this space. Enabling a hassle-free cross border trade will give small businesses access to global markets and enhance scalability in attaining exponential growth.“

Dr. Avik Sarkar, Professor, Indian School of Business (ISB) stressed that, “Global e-commerce platforms like Amazon give businesses an advantage in identifying demand from different geographic regions and markets, allowing easy and hassle-free facilitation of exports for MSMEs.”

Dr. Ramaseshan R, Director – BHI Capital Advisors and Executive Member of The Tamil Chamber of Commerce highlighted that, “E-commerce has given MSMEs access to a wider customer base which has helped them survive during the pandemic and strengthen their business, leading to large sales turnovers. The need of the hour is to handhold and educate MSMEs on the importance of integration with the global economy.” 

The session concluded with some recommendations for a specific chapter on e-commerce exports for the Foreign Trade Policy 2022. These include:

  • Increase e-commerce exports awareness
  • Implement end-to-end digitization for exports related processes
  • Develop specialised logistics capabilities for e-commerce exports
  • Simplify compliances and regulatory requirements for e-commerce export
  • Create long term capabilities and schemes to support the growth of e-commerce exports

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