The Micro, Small and Medium Enterprises (MSMEs) are receiving increased attention in upcoming Free Trade Agreements (FTAs), providing significant opportunities for them to engage in global trade, as per a statement by a senior government official on Thursday. Rajesh Agarwal, Additional Secretary in the Department of Commerce, highlighted that FTAs can facilitate better integration of MSMEs with global value chains.
While acknowledging the benefits, Agarwal also pointed out key challenges that need addressing in the sector. These include information asymmetry, access to affordable finance, reduction in regulatory burden, access to new markets, and capacity building through skill development programs.
In an event organized by industry chamber CII, Agarwal emphasized the need to give more weight to the work MSMEs can do and how they can leverage FTAs. He mentioned that FTAs offer advantages to MSMEs through the rationalization of customs duties, allowing them to become integral parts of Global Value Chains (GVCs). Lowering tariff disparities across regions facilitates smoother movement of goods and enhances manufacturing efficiency.
Agarwal highlighted the sector’s importance, contributing to 30% of GDP and about 50% of the country’s exports. However, he emphasized that for MSMEs to play a crucial role in GVCs, certain challenges must be addressed.
In the context of FTAs, countries are increasingly addressing information asymmetries faced by MSMEs through the sharing of best practices and other trade-enabling knowledge. Agarwal noted that all FTAs are now focusing on digitization processes, e-documentation, e-billing, and the digitization of customs processes and logistics involved in exports.
Agarwal provided an example of a recent pilot project involving the shipment of consignments to Florida through Singapore using e-bills. Currently, India is in the process of negotiating FTAs with key trade partners such as the European Union, the UK, and Australia, aiming for tariff concessions that will drive job creation and benefit MSMEs.
