ISSUE NO.

2 | 12TH JULY 2021

WHAT'S MY VIEW
Official publication of BLASH, IIFT DELHI

E-COMMERCE, MSMEs This series is exclusive on

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and India’s Exports

WRITTEN BY NAMIT PAL What's happening at
BLASH IIFT Delhi ?

Indian E-Commerce spectrum:

E-commerce market is expected to grow at a rate of over 25% in Follow our weekly posts :
The Voyager & Ship-O-
2020-24 and is expected to reach $ 200Bn market by 2026. Our
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internet penetration till date is close to 45% (close to 700 Mn), as
opposed to over 70% in China. Out of the total internet users, e-
commerce penetration is only about 200Mn. Out of which the
number of users who purchase anything on e-commerce at least
twice a year are close to 125 Mn. The growth in e-commerce is
inevitable, especially with initiatives such as Digital India. However,
where do we stand on linking this growth to our exports?

1.3 Bn 700 Mn 200 Mn 125 Mn

Total Population India Internet Penetration E-Commerce Penetration Active E-Commerce Users

Indian MSME spectrum:

Out of the total 25.13 Lakh Registered MSMEs in India, only about 35,000 (only 1.39%) engage in
exports. 64% of our total exports are done by 3rd party merchants, that procure material from the
1.39% MSMEs that export today. Along with that, MSMEs in India account for close to half of the
overall exports from the country.

2.53 Mn 35 K

Total Registered MSMEs MSMEs that export

 ISSUE NO. 2 | 12TH JULY 2021

Growth of the share of MSMEs in exports has two-pronged benefits. It will not only help the MSMEs to
grow further and increase their market globally but will also help improve our GDP figures. Therefore,
removing barriers from trade, especially when the country is emerging from the devastation caused by
the unprecedented pandemic, becomes essential.
However, for years, MSMEs have faced challenges when it comes to exporting their products globally. It
has been aspirational at best for smaller players in the market to export their products to countries in the
Europe and NAFTA regions. This is where E-Commerce boom in the country helped the players to
achieve the growth in such aspirational exports. With E-Commerce, all the challenges related to supply
chain complexities, cross border payments, initial investments, regulatory challenges, and so on get
eliminated, enabling the even the small scale manufacturers to export their products to global markets.
E-commerce played a major role in enabling such trade opportunities for MSMEs.

The Synergy between MSME, E-commerce and Exports

Imagine you are an MSME producing an article of cloth for the
UK market. You want to see if your new design of cloth will work
in the UK market or not. Traditionally, you will have to conduct
some sort of market research which will take time and will have
its own assumptions in the results. Otherwise, one will have to
export a sample batch of products to see how it sells. In either
case, you are taking a huge amount of risk with the product.
With E-commerce in place, an MSME can directly place the product in the foreign markets – at cheaper
price since the middle players in the supply chain are removed - and export post receiving the purchase
order, reducing the risk associated in exports and getting a direct consumer visibility. Using the reviews
on E-commerce, MSMEs also get to know consumer insights on their products in global markets.
Therefore, we can establish that E-commerce and MSMEs need to have absolute synergy which can
benefit both the sectors as well as India’s position in exports – both in B2C as well as B2B segments.

Foreign Trade Policies regarding E-Commerce

India’s E-Commerce sector can contribute close to $20-$22 Bn in export trade. The pandemic has
hastened the need for B2C trade, which our MSME players are capable to fulfil if they use E-Commerce
to export. US and European markets expect deliveries to be done in less than 10 days. This puts a
pressure on the E-Commerce industry as well to
• Create separate channels for B2C exports to these markets
• Sort out payment regulations
• Make sure that there is a channel for returns
Keeping these things in mind, it becomes imperative to update our FTP regarding e-commerce.
On April 1’21, India was to unveil the new FTP 21-26, which was reportedly supposed to have a
separate chapter for E-commerce to put emphasis on improving Indian MSME’s share in exports using
e-commerce. However, eyeing the current situation of pandemic, the FTP 16-20 was extended for one
more year.
 ISSUE NO. 2 | 12TH JULY 2021

In this context, we expect some additions to the FTP 21-26 pertaining to e-commerce and exports:
1. Include E-Commerce export platforms under the scheme “Niryat Bandhu” so that budding
e-commerce entrepreneurs can be mentored in International Trade.
2. Establishing an E-Commerce Export Promotion Council within the Export Promotion councils.
3. Establishing E-Commerce Export Zones to promote the synergy between MSMEs and Exports by
e-commerce.

The Road Ahead

These are challenging times. Our competitors are utilizing opportunities and taking leaps ahead when it
comes to establishing a place in global exports. But with each challenge lies an opportunity. India is
placed at an amazing spot where we are expanding our E-Commerce penetration, and we are
strengthening our MSME sector. All that we need to do now is establish a clear synergy between the two
and let the market forces take India to new heights in global exports, riding on the winds of MSMEs and
E-Commerce.

Namit Pal is a student of IIFT

Delhi and currently acts as a
Senior Club Coordinator for
Brandwagon - The Marketing
Club at IIFT Delhi

https://www.linkedin.com/in/namit-pal-7a4607140/