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Authors … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … …
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Ac knowledg ment … … … … … … … … … … … … … … … … … … … … … … …
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For ewor d by Dr VK Saraswat, Member, N ITI Aayog … … … … … …
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Message by BVR Subramanyam, CEO NITI Aayog … … … … … … …
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Message by I sh tiya que Ahmed , Senior Advisor,
NITI
Aayog …
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Disclaimer
The information contained in this presentation is of a general nature and is not intended to
address the circumstances of any particular individual or entity. Although we endeavor to
provide accurate and timely information. there can be no guarantee that such information is
accurate as of the date it is received or that it will continue to be accurate in the future. NO
one should act upon such information without appropriate professional advice after a
thorough examination of the particular situation. Foundation for Economic Development
(FED) has received no financial assistance from NITI Aayog.
Acknowledgements
The authors of this report would like to thank industry participants, Abhishek Dalal — CEO,
ArSports Equipment. Ajay Srivastava — Founder. Global Trade Research Initiative (GTRI),
Anil Bhardwaj — Secretary General, FISME, Anuj Jain — CEO, Shingora Textiles, Ashish
Chandra — Co-founder, GlobalFair, Ayush Jha — Tax and Customs Expert, GlobalFair,
Chandrakant Salunkhe — President, SME Chamber of India, Geeta Goel — MD, India MSDF
(Dell Foundation), Lokesh Kumar — General Manager, Exim Bank, Mithileshwar Thakur —
Secretary General, AEPC, Prashant Seth — Joint Deputy Director General, FIEO, Rahul Taneja
— Partner, Lightspeed Ventures, S Ganesh AGM — Direct Credit, SIDBI, Sanjay Bansal —
Director General, DGCIS, Sanjeev Leekha — President, EPC - Leather, Vasundhara Singh —
Policy and Partnerships, Etsy, Vinod Kumar — President, India SME Forum, Amazon Team
and the ECGC Team for their valuable insights in the preparation of this report.
We would also like to thank members from the ministry, Dr. Amiya Chandra Additional DGFT,
KV Tinumala Joint DGFT, Kuldip Singh — Assistant Director, MSME, Mercy Epao Joint
Secretary. MoMSME. U. C. Shukla Director (EP) — DC MSME, R. Ananth — Director CBIC,
DOR, Reema Jain — Joint Director. DPIIT. Roshan Lal - Additional Director General, CBIC
(Customs) and Surjith Karthikeya - Dy Secretary, Financial Services for their grounded
perspective on the subject.
MSMEs are often called the powerhouse of the Indian economy. MSMEs contribute significantly to
employment generation, exports, and overall economic growth. They reportedly account for more than
11 crore jobs
1
and contribute around 27.0% of India's GDP
2
. According to estimates, the sector consists of
around 6.4 crore MSMEs
3
, with 1.5 crore of them registered on the Udyam porta1
1
and employs around
23.0% of the Indian labor force
4
, making it the second-largest employer in India after agriculture. They
account for 38.4% of the total manufacturing output
2
and contribute 45.03% of the country's total
exports
5
.
Exports represent an enormous and under-utilized opportunity for the MSME sector. Sectors where Indian
MSMEs can participate and compete in export markets include handicrafts, handloom textiles, ayurveda
and herbal supplements, leather goods, imitation jewellery and wooden products. Globally, these sectors
constitute substantial markets exceeding USD 340 billion, whereas their domestic market is considerably
smaller.
Over time, small firms have encountered difficulties in tapping into export markets due to the inherent
obstacles posed by economies of scale. It proves more challenging for small enterprises to enter foreign
markets, adhere to compliance requirements, achieve cost-effective production, and efficiently manage
logistics for clients. However, the emergence of both broad and niche e-commerce marketplaces
addresses many of these barriers. By modifying our business environment to facilitate seamless exports
through e-commerce platforms, coupled with addressing essential ease-of-doing-business factors, we
have the potential to catalyze a radical transformation of our MSME sector into a formidable growth
engine.
In this report, we have six broad set of recommendations to boost MSME Exports:
Create One Stop Information Channel for
Exporters
India has several portals that help exporters access information, most of which offer incomplete or
outdated information. Therefore, creating a one stop information data intelligence portal using Al based
interface will be essential to impart information to MSMEs. This portal shall answer all the queries of a
potential exporter related to market such as tariffs, required paperwork, sources of finance, service
providers, available incentives, and potential customers. This could be done under the Ministry of
Commerce by enlisting a competent external vendor.
1
2
3
4
5
Udyam Dashboard
PIB Press Release: Contribution of MSMEs and Cottage Industry to GDP
NSS 73rd round, Ministry of Statistics & Programme Implementation,
2015-16 Author's Calculation based on NSS 73rd round
PIB Press Release: Contribution of MSMEs and Cottage Industry to GDP
07 Create National Trade Network (NTN) as
Comprehensive Trade Portal
Currently an exporter needs to navigate multiple portals to get necessary approvals. This includes the
documentation for licenses and certification to actual receipt of payment in the bank account. The entire
process is extremely cumbersome and requires navigating through several interfaces including the need
for physical submission of documents. This difficulty can be eliminated by creating an end-to-end national
trade portal (NTN) which will provide seamless experience to exporters including answering queries and
resolution of any gaps in paperwork. This will help reduce the process burden as well as delay for MSME
exporters and enable them to compete effectively. The Ministry of Commerce could form a task force to
review the status of previous initiatives in this regard (e.g., SWIFT) and create a timebound program to
implement a national trade network on par with the best in world.
Promote E-commerce Exports
Access to the market consistently emerges as a significant obstacle hindering MSME exports. Fortunately,
a readily available solution to this issue is E-commerce. According to Global Trade Research Initiative's
(GTRI) report, in 2022 MSMEs in China are already exporting goods worth over $200 bn through
E-commerce platforms while India's e-commerce export is barely $2 bn. One key reason for this gap is the
cumbersome compliance process associated with exports, especially when it comes to payment
reconciliation, which is particularly challenging for a new or small exporter. To boost e-commerce exports,
it is essential to create distinction between Exporter on Record (EOR) and Seller on Record (SOR), allow
reduction in invoice value without any percentage ceiling for all e-commerce exports, introduce annual
financial reconciliation process for e-commerce exporters, exempt import duties on rejects / returns,
consider an exemption on reconciliation requirements for shipments up to $1000 until NTN is
implemented and creating a green channel clearance for e-commerce exports.
Promote Ease of Merchandise Exports
While the government has placed high emphasis on improving Ease of Doing Business, it should be
extended to exports processes, particularly targeted at MSME exporters. For example, MSMEs can be
offered relaxation from certain compliance requirements for a period and forgiven on errors as they begin
to learn requirements of export markets. On the other hand, a process must be created for time bound
disbursement of incentives so that working capital is not blocked for MSMEs.
Boosting Exports from MSMEs 08 Improve Access to Export Finance
Access to finance is regularly seen as a key bottleneck for MSMEs. Towards this end, promotion of Export
Credit Guarantee can help improve working capital availability for MSMEs. The current uptake of ECGC
schemes is only 10% and the government must create an incentive package to increase it to 50% or more.
Finally, a single marketplace can be created, like in the case of higher education loans, where all providers
of export credit can compete for business and help reduce the cost to MSMEs.
Ensure Accurate Measurement
Currently, a dependable single data source for MSME exports is lacking. The existing estimates of MSME
exports are likely unreliable and almost certainly inflated, given that they rely on an outdated list of
reserved sectors for MSMEs. Initiating any improvement requires accurate measurement and consistent
tracking of impact. Establishing a reliable depiction of MSME exports involves integrating DGFT trade data
with GST and income tax data. This fusion of datasets, utilizing PAN numbers as the common identifier, will
provide an accurate portrayal of MSME exports. A key issue is reluctance to share information across
government departments. To resolve this, a committee could be formed with representatives from DGFT
as well as the finance ministry along with the MSME ministry to create a mechanism for sharing requisite
information without compromising confidential data of individual firms.
Overall, the potential of MSMEs to grow exports is enormous. This potential can be realized through some
pragmatic measures which reduce the cost and friction of doing business for these firms. The measures
proposed in this report can help boost MSME exports without placing any additional fiscal burden in the
form of incentives or subsidies. This report employs a comprehensive research methodology combining
secondary research and stakeholder analysis to achieve a thorough understanding of the subject. The
secondary research phase involved an in-depth literature review and data collection from various data
sources, including government publications and industry reports. Simultaneously, a stakeholder analysis
was conducted, wherein relevant stakeholders were identified, and structured interviews were carried out
to map their perspectives. The qualitative insights obtained from stakeholder interactions were
integrated with the quantitative data derived from secondary research, to provide a holistic
understanding of the subject.
Boosting Exports from MSMEs 09 In 2020, the Finance Ministry decided to change the definition of Micro, Small and Medium Enterprises
(MSMEs) because the low threshold limit in the old definition of MSMEs prevented them from expanding
since they might lose certain benefits that MSMEs enjoy. The other change that has been introduced was
to add turnover as another measure to define an MSME.
Table 2.1: Revised Definition of Micro, Small and Medium Enterprises
Parameters Micro Small Medium
Investment in Plant and Machinery < 1 Crore INR < l0CrorelNR < 50 Crore INR
Annual Turnover < 5 Crore INR < 50 Crore INR < 250 Crore INR
No. of MSMEs (Based on NSS data) 6.3 Crore 3.3 Lakh 5 thousand
No. of MSMEs 1.5 Crore 4.6 Lakh 41 thousand
(Based on Udyam data as on 31st
March 2023)
Between FY 2019 and FY 2021, India witnessed a steep rise in the establishment of new MSMEs units.
Around 40 lakh new Micro, Small, and Medium Enterprises (MSMEs) were established
6
. This remarkable
growth can be attributed to the rising number of new micro-enterprises, which played a crucial role in
driving the overall increase in the number of new MSMEs being established.
Over the last 8 years, the share of MSME units engaged in manufacturing has grown by ~ 7%. Currently,
around 38% of the total 54 lakh MSME units
7
are engaged in manufacturing.
Figure 2.1 provides an insight into the distribution of activity share among the categories of MSMEs. We
clearly see that the bulk of manufacturing activity which is suitable for export is distributed largely
amongst small and medium enterprises.
•Manufacturing•Services
Source: Udyam Registration Publication
Figure 2.1: Activity share of MSMEs across the three categories of MSME
52%
According to the 2020-21 Annual Report of the Ministry of MSMEs, the top five states with the highest
concentration of manufacturing MSMEs are Uttar Pradesh, Maharashtra, Tamil Nadu, Karnataka, and
Gujarat.
06
Creating Udyog Sahayak Enterprises Network (USENET) for Employment Generation and Scale-up in the MSME Sector
07
Udyam Dashboard
11 A handful of firms are contributing to statistics reported from the MSME sector. According to NSS
estimates in 2015, there were approximately 6.34 crore MSMEs in India. However, a closer examination of
the sector's composition reveals a very skewed distribution. Out of the total 6.34 crore MSMEs, nearly 6.3
crore are in fact microenterprises which have less than 20 workers and hence are outside most formal
regulation (other than ESl)
8
• Only the rest of the 12.8 lakhs which are above the 20-worker threshold are
therefore part of the formal system (e.g., PF system)
9
•
Among these ~13 lakh enterprises registered in the Provident Fund database, around 70,000 have
revenues exceeding 5 crores, thereby crossing the threshold from the micro category to the small
category. The remaining 9.3 lakhs, despite being formal enterprises with more than 20 workers, still fall
under the micro segment in terms of revenue definition
10
•
The current policy landscape in India incentivizes MSMEs to remain dwarfs, hindering their ability
to reap the benefits of economies of scale. For instance, the Industrial Disputes Act (IDA), 1947
mandates companies to get permission from the Government before retrenchment of employees. This
restriction is, however, applicable only to firms with more than 100 employees. This means that firms with
less than 100 employees do not have to get permission from the government before firing their
employees.
Small businesses are indeed the primary beneficiaries of various policy initiatives and economic packages,
aimed at providing support and fostering their development. However, these very incentives
unintentionally create a disincentive for these businesses to surpass certain thresholds and expand their
operations. As a result, MSMEs face significant challenges in capitalizing on the advantages offered by
economies of scale. By staying small, they miss the potential cost savings, increased efficiency, and
enhanced competitiveness that come with expanding their operations. The reluctance to grow beyond
their initial size limits their ability to tap into larger markets, access better resources, and attract
investments for innovation and expansion.
Figure 2.2 compares India's market size to the global market size for MSME-Dominant industries.
Contrary to popular belief, the domestic market size for these industries accounts for only 0-2% of
the global market size 11. While India has a large population, a significant proportion of it is still
economically disadvantaged, and thus has limited purchasing power. This means that the effective size of
the Indian market is smaller despite its large population. High competition along with small
market size isn't ideal growth environment for any manufacturing MSME.
• Indian Market
Size
e Global Market
Size
Source: FED Analysis based on market reports
Toys Leather
Goods
$991
$756
Handicrafts Readymade
Garments
Figure 2.2: Indian market size and global market size for the MSME dominated industries, in USO Billion
08
Note: ESI stands for Employee State Insurance. It is a contribution made by employees as well as employers to support employees to take
part in self-financed, healthcare, insurance funds.
09
Creating Udyog Sahayak Enterprises Network (USENET) for Employment Generation and Scale-up in the MSME Sector
10Creating Udyog Sahayak Enterprises Network (USENET) for Employment Generation and Scale-up in the MSME Sector
12
11FED Analysis based on Market Reports Therefore, exporting is crucial for Indian MSMEs to break away from dwarfism and unlock their true
growth potential. Exporting can allow 54 lakh manufacturing MSMEs to tap into new markets and
expand their customer base, leading to an increased revenue and profit. Additionally, it helps businesses
diversify their customer base and increase their revenues. Moreover, exporting can enhance a producer's
reputation as a global player and a credible business partner, leading to increased visibility and
marketability.
Theoretically, India has a competitive advantage in exporting low skilled manufacturing products,
but the country consistently underperformed. India's market size is on average less than 1 % of the
Global market size for low skilled manufacturing exports even though Indian MSMEs are characterized by
low skilled and labor-intensive manufacturing
12
• These manufacturing units employ approximately 10% of
entire the Indian labor force
13
• Despite India's large working-age population (20% of the global
working-age population
14
) and significant employment in manufacturing MSMEs, its share of global
exports of low-skilled manufacturing products is only 5%
15
•
Figure 2.3 is a scatter plot of non-high income countries which plots the share of low skilled
manufacturing on the x axis and share of working age population on the y axis. Compared to India,
Vietnam, Bangladesh, and China have a more disproportionate share of low-skilled goods exports given
the size of their working age population. By unlocking MSMEs, we can boost our export share in
low-skilled goods export.
QI
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C:
0
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0
0
QI
Ill
0.5
0.4
0.3
0.2
0.1
0 0.05 0.1 0.15 0.2 0.25
Share of Working Age Population among Non-HIC countries
Figure 2.3: Labor endowment and low skill manufacturing export performance of non-high-income countries
Source: India's Export-Led Growth: Exemplar and Exception, Shoumitro Chatterjee and Arvind Subramanian, 2018
Despite the opportunity for MSMEs to pursue exports, only 0.95% of MSME engage in it 1
6
• Over 1.5
lakh units out of 1.58 crore registered MSMEs on the portal claimed to export their goods and services 7
7
•
Figure 2.4 showcases the distribution of MSMEs by annual turnover. It is worth noting that for a significant
number of MSMEs, the annual turnover from exports is less than INR 1 crore.
12
KLEMS,2019-20,FED Analysis
13
Udyam Dashboard
14
World Bank Estimate of Population ages 15-64
15
India's Export-Led Growth: Exemplar and Exception, Shoumitro Chatterjee and Arvind Subramanian, 2018
16
Udyam Registration Publication
17
Udyam Dashboard
13 58
Appendix
Table 1: Product categories well suited for MSME exports and subsequent size
of global exports
36
Product Category Product HS Code Global Export
Herbal
Supplements and
Ayurveda
Products
Essential oils, whether
terpene less, incl. concretes
and absolutes; resinoids
3301 USD 6.06 Bn
Ayurvedic products 3004901
1
USD 7.08 Bn
Total USD 13.14
Bn
Wood Products Furniture and parts thereof
Wooden furniture for offices
Wooden furniture
Furniture of bamboo
Total USD 152.89
Bn
Handicrafts Candles and the like 3406001
0
USD 4.69 Bn
Agarbatti and other
odoriferous preparation
which operate by burning
330741
Handbags of other materials
excluding wicker
420229 USD 1.11 Bn
36
ITC Trade Data, 2021 59
Parts of domestic decorative
articles used as tableware
and kitchenware
442191 USD 0.94 Bn
Handmade paper and
paperboard of any size or
shape
480210 USD 0.10 Bn
Lamps and lighting fittings 9405 USD 74.51
Bn
Dress materials hand
printed: Of cotton and of
various other fabrics
6307 USD 27.4 Bn
Total USD 109.25
Bn
Leather Products Handbags, whether with
shoulder strap, including
those without handle
420221 USD 17.02
Bn
Articles of a kind normally
carried in the pocket or in
the handbag: Wallets
420231 USD 4.4 Bn
Articles of apparel and
clothing accessories, of
leather or composition
leather
4203 USD 7.50 Bn
Total USD 28.92
Bn
Jewellery Imitation Jewellery 7117 USD 8.2 Bn 60
Total Value of Global Exports in all categories USD 340.17
Bn
Table 2: Share of Indian exports in the identified product categories and
potential for Indian exports in these categories
37
Product Product Indian
Export
India’s
Share
Unrealised
Potential
Herbal
Supplements
and Ayurveda
Products
Essential oils, whether
terpene less, incl. concretes
and absolutes; resinoids
USD 0.07
Bn
16% USD 5.08
Bn
Ayurvedic products USD 0.17
Bn
2.5% USD 7.08
Bn
Total USD 1.14
Bn
USD 12.17
Bn
Wood
Products
Furniture and parts thereof USD 1.38
Bn
1% USD
113.18 Bn
Wooden furniture for offices USD 0.06
Bn
1% USD 4.5 Bn
Wooden furniture USD 0.85
Bn
3% USD 32.74
BN
Furniture of bamboo USD 0.00
Bn
0% USD 0.23
Bn
Total USD 2.29
Bn
USD 150.6
Bn
37
ITC Trade Data, 2021 61
Handicrafts Candles and the like USD 0.08
Bn
2% USD 4.61
Bn
Agarbatti and other
odoriferous preparation
which operate by burning
USD 0.16
Bn
31% USD 0.34
Bn
Handbags of other materials
excluding wicker
USD 0.01
Bn
2% USD 1.09
Bn
Parts of domestic decorative
articles used as tableware
and kitchenware
USD 0.07
Bn
8% USD 0.84%
Handmade paper and
paperboard of any size or
shape
USD 0.01
Bn
11% USD 0.09
Bn
Lamps and lighting fittings USD 0.24
Nb
0% USD
74.27Bn
Dress materials hand
printed: Of cotton and of
various other fabrics
USD 0.47 2% USD 26.93
Bn
Total USD 1.05
Bn
USD 108.2
Bn
Leather
Products
Handbags, whether with
shoulder strap, including
those without handle
USD 0.35
Bn
2% USD 16.67
Bn
Articles of a kind normally
carried in the pocket or in
the handbag: Wallets
USD 0.35
Bn
8% USD 4.11
BN 62
Articles of apparel and
clothing accessories, of
leather or composition
leather
USD 0.68
Bn
9% USD 6.82
Bn
Total USD 1.38
Bn
USD 27.6
Bn
Handloom
Textiles
Woven fabrics of silk or of
silk waste; Of Handloom
USD 0.01
Bn
10% USD 0.11
Bn
Woven fabrics of combed
wool or of combed fine
animal hair; Of Handloom
USD 0.00
Bn
1% USD 0.11
Bn
Carpets, rugs and mats of
handloom
USD 0.07
Bn
2% USD 3.83
Bn
Cotton durries of handloom
(including chindi durries,
cotton chenille durries, Rag
Rug durries, printed durries,
druggist)
USD 0.41
Bn
15% USD 2.3 Bn
Scarves of Silk, Handloom;
Shawls, scarves, mufflers,
mantillas, veils and the like;
of silk and silk waste; Of
Handloom
USD 0.03
Bn
5% USD 0.58
Bn
Gloves, mittens, and mitts;
Of handloom
USD 0.04
Bn
3% USD 1.12
Bn
Bed sheets and bed covers,
of cotton, Handloom
USD 0.7
Bn
57% USD 0.51
Bn 63
Other bed linen, printed: of
cotton: Handloom
USD 0.12
Bn
6% USD 2.04
Bn
Embroidery on a textile
fabric ground, in the piece,
in strips or in motifs
USD 0.2
BN
11% USD 1.54
Bn
Total USD 1.58
Bn
USD 12.1
Bn
Jewellery Imitation Jewellery USD 0.16
Bn
2% USD 8.2
Bn
Total Value of Indian Exports in all the
categories
USD 7.6
Bn
USD
318.87 Bn
Table 3: Initiatives to support access to finance
Initiative Description
Credit Guarantee
Scheme for MSME – I &
II
•It provides credit guarantee to MSMEs up- to Rs.
2 crores (which was Rs. 1 crore), per borrowing unit
from a single lending institution.
•All proposals for sanction of guaranteed approvals
for credit facilities above Rs.50 lakh and up-to
Rs.200 lakh will have to be rated internally by the
MLI and should be of investment grade.
•Discounted interest rate loan.
•Guarantee cover for 5 years, against a one-time
guaranteed fees and an annual service fee,
depending on the loan amount and
geographical region.
•The scheme provides flexibility in repayment, and
MSMEs can choose from various repayment 64
options such as monthly, quarterly, or half-yearly
instalments
Interest Equalisation
Scheme (IES)
•Provides interest rate subsidy of 2-3%, to
exporters for pre- and post-shipment credit. This
scheme focuses on manufacturers in certain MSME
focused sector.
Credit Guarantee
Scheme for
Subordinate Debt
•Promoter(s) of the MSMEs are given credit equal
to 50% of their stake (equity plus debt) or Rs. 75
lakh whichever is lower.
•Debt - 90% guarantee coverage would come from
scheme/ Trust (CGTMSE) and remaining 10% from
the concerned promoter(s).
•1.50% per annum on the guaranteed amount on
outstanding basis, as guarantee fee to be borne by
the exporter.
•There can be a moratorium of 7 years (maximum)
on the payment of principal. However, interest will
be paid as and when applied.
•Ease in repayment, after completion of moratorium
period, principal shall be fully repaid within the tenor
of loan (as per sanction) in form of Principal Equally
Distributed (PED)
Export Credit Re-
Financing (ECR)
•ECR is a scheme, by the Reserve Bank of India
(RBI) to provide short-term credit to banks and
financial institutions for export credit at the
prevailing repo rate under the Liquidity Adjustment
Facility (LAF)
•Scheduled Banks extend this facility at Repo Rate
and adding a Credit Risk Premium and Spread
close to 3-4%. 65
•The scheme aims to increase the availability of
credit to exporters and to support export
growth.
Table 4: Initiatives to support market access
Initiative Description
Market Access Initiative
(MAI)
•Reimbursement regarding participation support
to the regular Director/Partner/Proprietor or a
regular officer of the company on senior managerial
position, except a foreign national, in terms of flight
ticket reimbursement.
•Provided to the maximum of three MAI events in a
year, per member participant company.
•Support to conduct Market and Research
Studies, Joint Events, Reverse Buyer-Seller Meet
(RBSMs).
•Support to upgrade marketing and branding
ability for the MSMEs.
•Capacity Building Support of Exports, in terms
of Standards, Regulations, etc.
International
Cooperation Scheme
•Reimbursement for MSMEs in participation in
international exhibitions, trade fairs and buyer-
seller meet in foreign countries (physical and
virtual) for space rent, up to 100% with the
maximum of Rs. 1.00 lakh or actual rent paid,
whichever is lower (for one representative from
each participating enterprise).
•Deputation of MSME Business Delegations to
foreign countries, which includes Air Fare, and 66
Duty Allowance of up to $150 per day on
reimbursement basis, which includes export
promotion organisation as well as other MSMEs.
Procurement and
Marketing Support
(PMS)
•Participation of Individual MSEs in domestic
Exhibition/ Trade Fair
•Developing capacity of MSMEs in Development of
Marketing Haats, adoption of modern packaging
technique, bar code and e-commerce platform
•Organizing events like Domestic Trade Fair&
Exhibition/ Awareness programs/ National &
International Workshops & Seminars/ Vendor
•Development Programs. Development of retail
outlet
Table 5: Initiatives to create a favorable business environment
Initiative Description
Scheme of Fund for
Regeneration of
Traditional Industries
(SFURTI)
•The financial assistance provided for a specific
project has a ceiling of Rs. 2.5 crore for Regular
Cluster (up to 500 artisans) and a ceiling of Rs.
5 crores for Major Cluster (more than 500
artisans)
•Aims to organize traditional industries and
artisans into collectives by increasing production
and value addition to make products competitive
•Setting up of production facility with latest
machinery.
•Build general awareness, counselling, skill
development and capacity building, exposure 67
visits, market development initiatives, design
and product development, etc.
•Creation of common facility centres, raw material
banks, upgradation of production infrastructure,
warehousing facility, tools and technological
upgradation, etc.
•Marketing connects and Brand Building, e-
commerce, and Exposure Visits.
Micro & Small
Enterprises Cluster
Development
Programme (MSE-CDP)
•Creating Common Facility Centers including
Plug & Play Facilities.
•Support for Flatted Factory Complexes and
Infrastructure Development Projects.
•Assistance up to 80% of the maximum project
cost of Rs. 30 crores for creation of Common
Facility Centre such as common
production/processing center, design center,
testing facilities including plug and play facilities
•Assistance up to 70% of the maximum Project
cost of Rs. 15 crores for development of land,
roads, drainage, power distribution etc. in
new/existing industrial (multi -product)
areas/estates/Flatted Factory Complex
Trade Infrastructure for
Export Scheme
•The Central Government helps with
infrastructure development in the form of grant-
in-aid, wherein they contribute approximately
50% of the total equity in the project. However,
in NE and Hill States, including the Union
Territory of J&K and Ladakh, this contribution
increases to 80%. 68
•Furthermore, in states that have relatively poor
export infrastructure and lack institutional
capacity for preparing good Detailed Project
Reports (DPRs), but possess positive export
potential, the grant can reach up to 80% of the
total equity.
•The maximum limit for grant-in-aid is set at Rs.
20 crore per infrastructure project, excluding the
cost of land.
•Priority will be given to infrastructure projects
that involve significant contributions from
stakeholders and bank financing. In states with
comparatively better export infrastructure and
institutional capacity, Public-Private Partnership
(PPP) projects will be encouraged to leverage
the funds under the Trade Infrastructure for
Export Scheme (TIES) optimally.
Town and Export
Excellence
•Recognized associations of units in Towns of
Export Excellence can avail financial assistance
under Market Access Initiative (MAI) scheme, on
priority basis, for export promotion projects for
marketing, capacity building and technological
services.
•Common Service Providers in the Towns of
Export Excellence are entitled for Authorisation
under Export Promotion Capital Goods (EPCG)
Scheme
One District One
Product (ODOP) /
District Export Cluster
•Aimed at decentralizing the export promotion
initiative to state/UT and district level, with
convergence of ongoing schemes at district
level. 69
•Providing Capital Investment support to existing
micro-enterprises, with preference to enterprises
producing ODOP products. With new units,
supported only for ODOP products only.
•Extending of Infrastructure support for Marketing
and Branding. If marketing and branding are
being conducted at the state or regional level,
other products would also be supported.
•Branding and Marketing support through grants
of up to 50% of total expenditure, for the state or
regional level ODOP product, to SHGs, co-
operatives, etc. Branding and marketing are
crucial for the growth of Micro Small and Medium
Enterprises (MSME).
•Extension of Subsidy under the Pradhan Mantri
Formalisation of Micro Food Processing
Enterprises (PMFME) Scheme with the ODOP
approach where a credit-linked capital subsidy
comprising 35% of the eligible project cost, up
to Rs. 10 lakh (US$ 13,379.7) may be provided
where the beneficiary may need to contribute at
least 10% of the amount and the balance as a
bank loan.
•Providing a credit-linked grant of 35% to support
groups such as self-help groups (SHGs),
Producer Co-operatives, etc. for operations such
as sorting, grading, storage, packaging,
processing and so on.
•Extension of Seed Capital fund of Rs. 40,000
(US$ 535.2) per SHG member involved in food
processing, for working capital and buying small
tools. 70
•Providing entrepreneurship focused Training for
entrepreneurship development, operations,
marketing, accounting, FSSAI standards, GST
registration, Udyog Aadhaar, Geographical
Indication (GI) registration and so on.
Furthermore, training designed for ODOP
products is provided on hygiene, storage,
packaging and development of new products.
Such training helps the entrepreneurs conduct
business operations efficiently and improve
product quality.
Table 6: Schemes that reduce the cost of serving the international markets
Initiative Description
Export Promotion
Capital Goods Scheme
•The EPCG license offers financial assistance to
exporters by eliminating import charges.
•Under the EPCG Scheme, duty-free imports of
goods are allowed if the exporter fulfils an
export obligation six times the amount of duty
savings on capital goods within a span of six
years.
•Once the EPCG License is obtained, it must be
registered at the designated port of entry to be
eligible for duty waivers when submitting the Bill
of Entry.
•For exporters with shipments valued below ₹1
crore, compliance also entails providing a bond
or bank guarantee. The bond must be furnished
at the customs port for exporters with exports 71
exceeding ₹1 crore, while a bank guarantee is
not mandatory.
•Early redemption is permitted as an incentive
for fast-track enterprises to boost exports. If the
license holder has fulfilled 75% or more of the
specific export obligation and 100% of the
average export requirement, if any, in less than
50% of the original term, the remaining export
obligation will be waived.
Duty Drawback Scheme •Drawback allowed up-to two years from the date
of import.
•Partial redemption of the paid duty, to be a
certain percentage, where the identity of the
goods is clearly defined by the authorised
personnel from the Customs.
•Redemption percentage dependent on the time
after the goods are imported.
Remission of Duties
and Taxes on Exported
Products (RoDTEP)
Scheme
•Refund of Duties/Taxes at Central, State and
Local Level.
•Refund includes indirect taxes on goods and
services used in the production of the exported
product.
Table 7: Initiatives to simplify and fast track certain aspects of export
procedure
Initiative Description
Liberalized Indian AEO
(Authorized Economic
•Internationally recognised certificate•Internationally recognised certificate•Internationally recognised certificate 72
Operator) Program for
MSMEs
•Granting of AEO status within only 15 days
from electronic submission of complete
documents for AEO Tier T1.
•Swifter Customs clearance for accredited
stakeholders in the global supply chain viz.
importers, exporters, logistic service providers,
custodians etc.
•Bank Guarantee up- to 50%, 75%, and 100%
respectively for T1, T2, and T3.
•The facility of Direct Port Delivery (DPD) of
imported containers, Direct Port Entry (DPE) of
their Export Containers, high level of facilitation
in customs clearance of their consignments
thereby ensuring shorter cargo release time.
•Exemption from Bank guarantees, priority for
refund/ rebate/ duty Drawback, as well as a
Client Relationship Manager at the customs
port as a single point of interaction.
•Deferment of payment of Customs duty i.e., it is
not required to paid before the clearance of the
imported goods by Customs.
Status Holder
Certification
•Authorisation and customs clearances for both
imports and exports on self-declaration basis.
•Bank Guarantee up-to 100%.
•Allowance of Export of free-of-cost samples,
without any duties, subject to certain annual
limits.
•Submission of paperless declaration without
any supporting document. 73
•Status Holder Certification is categorised
across 5 categories denoted with stars, based
on their export values (FOB/FOR) in 2 out of 4
years, with USD 3 million, 15 million, 50 million,
200 million, and 800 million for 1 star, 2-star, 3-
star, 4 star and 5 stars, respectively.
•Input-output norms are fixed on priority basis,
within 60 days by the Norms Committee.
Advanced
Authorisation
•No advanced duty payments at the time of
import, which includes duties like Basic Custom
Duty, Additional Custom Duty, Education Cess,
Anti-Dumping Duty, Countervailing Duty,
Safeguard Duty, and Transition Product Specific
Safeguard Duty.
73