Simplified Rules, Better Logistics Key To MSME Ecommerce Growth: Experts

While speaking at an industry event, experts have called for separate customs supervision codes to expedite cross-border eccommerce clearance and noted that there is a need for simplified regulations and enhanced logistics to boost micro, small and medium enterprises (MSMEs) participation in global space.

In India, ecommerce exports offer tremendous growth potential for Indian MSMEs but currently see only 1 per cent engaging in direct exports. To achieve the government's ambitious target of USD 200-300 billion in ecommerce exports by FY 2030, it is essential to adopt more flexible policies and address existing challenges in the sector.

Speaking at the India SME Forum's event, experts noted that despite the central government's plans to promote MSME ecommerce exports through new policies, challenges remain, particularly due to financial and regulatory barriers. High EDPMS closure charges can consume up to 50 per cent of shipment value, making exports unviable for small parcels. 

The Reserve Bank of India's (RBI's) 25 per cent variation limit on payment reconciliation is often insufficient for transactions with high price variability. Increasing this limit to 50 per cent and extending payment realisation periods to 18 months would better support MSMEs and align with best global practices.

Additionally, customs reforms are essential to facilitate ecommerce exports. The primary policy proposal is to simplify and expedite the customs clearance process for certain low-risk shipments through pre-emptive assessments and automated procedures. This includes establishing separate customs supervision codes specifically for cross-border ecommerce trade to ensure faster clearance, streamline payment procedures, and enhance data collection for policymaking.

Looking ahead to the USD 300 billion future of the Indian ecommerce market, Shiprocket’s report titled ‘How MSMEs of Bharat sell online’ highlighted the critical need for inclusive growth. It added that sustainability concerns are reshaping consumer preferences and MSMEs are adapting to these changes by increasingly adopting eco-friendly practices in logistics, such as sustainable packaging and electric vehicles. MSMEs are witnessing a rising demand for ethically sourced products like vegan beauty products, organic wellness items, and sustainable pet care products.

Bipin Sapra, Partner, EY said, “Indian MSMEs have tremendous potential to excel in global ecommerce markets, but they encounter several challenges, including high shipping costs, complicated customs procedures, and cumbersome returns management. To address these issues effectively, we must implement global best practices and establish dedicated export facilitation mechanisms. This includes adopting forward-deployed strategies to streamline returns, leveraging digital tagging for better tracking and management of shipments, and enhancing our overall logistical infrastructure."

Sapra added that by tackling these challenges head-on, the export process can be simplified and significantly boost the ability of India's MSMEs to compete and thrive on the international stage.

Bhupen Wakankar, Director - Global Trade, Amazon said, “Ecommerce is unlocking vast global opportunities for Indian MSMEs to tap in large consumer demand across the world. This demand stretches across categories like home and kitchen, apparel and textiles, Consumable Products, Toys and many more categories. The application of technology in cross-border logistics and payments as well as in areas like market access and market intelligence has been instrumental in helping Indian MSMEs expand their reach beyond domestic borders."

Wakankar added that the government's proactive measures, including the recent announcement of Ecommerce Export Hubs and ongoing investments in digital infrastructure, are pivotal to this growth. These initiatives are set to provide essential support for businesses navigating international trade complexities. Continued support and simplification in areas such as customs compliance, cross-border payments, and logistics will further accelerate the growth of this sunrise sector.

The rise of ecommerce in India is fueled by the country’s digital revolution– increased internet penetration, smartphone usage, and digital payment systems. Major cities like Delhi, Bangalore, and Mumbai are prominent hubs for sellers, with Delhi alone accounting for around 6 per cent of the total orders in 2023. While the seller contribution in urban hubs is driving ecommerce activity, the majority of orders– around 71 per cent, originate from non-metro areas, as per Shiprocket’s report.

Vinod Kumar, President, India SME Forum said, “In today’s interconnected world, the global marketplace offers unprecedented opportunities for Indian MSMEs to thrive. The path to successful international expansion lies in addressing key challenges like customs compliance, logistics, and cost management. By harnessing the power of digital tools to understand and meet customer preferences, and by advocating for policy reforms to ease export processes, we can empower our small and medium enterprises to compete and excel on the global stage."

Kumar mentioned that it is through such concerted efforts that India can transform the potential of Indian MSMEs into tangible success stories across borders.

Abhishek Sharma

BW Reporters The author is a senior correspondent at BW Businessworld