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Compliance plays a big part in helping Indian MSMEs grow exports

May 16, 2024

While challenges persist, the compliance levels of Indian MSMEs in terms of export have been gradually improving, say experts.

The compliance levels of Indian MSMEs in terms of export vary depending on various factors.

Micro, small and medium enterprises (MSMEs) play a critical role in shaping India’s economy by contributing over 29% to the GDP and 50% of exports. However, say industry experts, India’s MSMEs have far higher potential and should work towards understanding global market demand and compliances to become competitive in exports.

The compliance levels of Indian MSMEs in terms of export vary depending on various factors, says Farida Dholkawala, Partner, Desai & Diwanji. “While challenges persist, the compliance levels of Indian MSMEs in terms of export have been gradually improving, with efforts from both the government and the private sector to enhance awareness, provide training and simplify procedures,” adds Dholkawala.

Kalyan Basu, MD & CEO, Vayana TradeXchange, says the compliance in exports has a direct correlation with sustained scalability, and so its importance is paramount. “Merchandise exports from India have multiple layers of compliance and monitoring authorities to pass through — like customs, DGFT, RBI, banks — both in terms of actual shipment and money movement, and hence are well covered in terms of compliance,” adds Basu.

Key compliances for MSMEs
Dholkawala talks about the three important compliances that Indian MSMEs should bear in mind while exporting.

“First and foremost is documentation and procedural compliance, which is all about MSMEs having all the necessary export-related documents in order, such as the bill of lading, commercial invoice, packing list, certificate of origin, and any other specific documents required by the importing country. Other licences, permits and clearances would also have to be obtained — including PAN, GSTIN, registration with the Udyam portal, Importer-Exporter Code, Registration cum Membership Certificate (RCMC) from an authorised Export Promotion Council (EPC), registration with the ICEGATE portal of the Customs Department,” says Dholkawala.

Then comes product and technical compliance, which deals with MSMEs ensuring that their products comply with the technical standards, quality norms and regulatory requirements of the importing country. “This includes compliance with product labeling, packaging and certification norms. Specific industries like food, pharmaceuticals and engineering goods have additional product-specific regulations to follow,” notes Dholkawala.

The third is financial and export control compliance, which is about MSMEs ensuring proper invoicing and adherence to payment timelines and other provisions mentioned under the foreign exchange regulations. “Further, the Reserve Bank of India has issued several instructions or guidelines to banks relating to lending to the micro, small and medium enterprises sector. The MSMEs would also have to ensure compliance with such regulations if it has availed credit,” says Dholkawala.

Service exports need attention
Industry experts say that the area which now needs more attention is service exports, which are growing at a very fast pace and stand at 40% of our overall exports.

Basu says that very little data is available in the public domain related to service exports. The monitoring mechanisms are not so clearly demarcated, pricing of services is an area of great concern, contracts are vague and sometimes misleading, with major fallout often hitting headlines in national newspapers involving large concerns and also affecting geopolitical relations between countries, says Basu.

“Service exports is the area we need to focus on in terms of compliance and monitoring much more than what we are doing today,” adds Basu.

[The Economic Times]

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