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How India is Poised Amid Global Demand Revival

How India is Poised Amid Global Demand Revival

As global demand shows signs of revival, India must seize the opportunity to capitalize on this trend.
In 2023, global demand was relatively subdued due to lower consumer consumption and rising inflation in key markets such as Europe and the US. This resulted in a decline in India’s merchandise exports. However, experts now anticipate a gradual recovery in global demand, evidenced by a 11.86% year-on-year growth in exports (to $41.4 billion) in February 2024.
Despite the slowdown, industrial products like engineering goods, petroleum products, pharmaceuticals, and electronic goods maintained or increased their export levels. In contrast, consumer-facing segments such as garments, gems and jewelry, and handloom products saw a decline, according to Anubhav Kathuria, Director of Synergy Steels.
“In macro terms, we see inflation cooling down to preferable levels in Europe, which could enhance prospects for consumer-focused merchandise producers in India. The stainless steel industry, impacted by global macroeconomic developments, is looking at the year ahead with cautious optimism,” said Kathuria.
Aruna Sharma, Former Secretary, Ministry of Steel, believes a demand revival would also benefit small businesses and generate employment. “India contributes around 16% of global growth and has maintained a consistent growth rate of 6-8% in recent quarters. Despite challenges and reduced savings, the demand for FMCG goods is reviving. A global economic revival will positively impact MSMEs, driving employment and economic growth,” Sharma stated.

Strategies to Capitalize on the Gradual Demand Revival

Gopalakrishnan Narasimhan, Partner & Director-Africa at Kaizen Institute, noted that the gradual revival in global demand is expected to benefit key industries. Exports of electronic goods have seen remarkable growth, increasing over 25% from $21.07 billion in April 2023 to $26.51 billion in April 2024.
India’s major exports include pearls, precious and semi-precious stones and jewelry (16%); mineral fuels, oils, and waxes (12%); nuclear reactors, boilers, machinery, and mechanical appliances (5%); pharmaceutical products (5%); and organic chemicals (4%).
“Product linked incentives (PLI), which are expected to bring in incremental investment of Rs 7,920 crore and increase exports worth Rs 64,400 crore, alongside flexible FDI policies, have significantly diversified India’s export basket towards more value-added products like electronic goods and chemicals,” Narasimhan added.

Strengthening Supply Chains

Kathuria highlighted that India has learned from the pandemic to create a robust domestic base for raw materials and components in key manufacturing industries. This strategy includes infra-investments, financial incentives, and policy direction. The Critical Minerals Mission, for example, promotes the exploration of 30 critical minerals crucial for manufacturing stainless steel, electronics, and electrification products, which currently rely heavily on imports.
Narasimhan emphasized the volatility in the geopolitical realm and the potential disruptions to supply chains due to geopolitical tensions and economic sanctions. He projected the manufacturing industry’s share of GDP in India to increase from 15.6% to 21% by 2031, doubling India’s export market share. The government aims to boost merchandise exports to $1 trillion by 2027-28.
“With increased budgetary allocations for the manufacturing industry and the integration of emerging technologies like AI, along with dedicated schemes like Gati Shakti and the National Infrastructure Pipeline, India is on track to enhance its manufacturing and distribution networks and emerge as a global manufacturing hub,” Narasimhan noted.

Impact of Demand Revival on India’s Trade Destinations

Sharma pointed out that building trade centers takes years, and maintaining consistent supply and presence is crucial. “India lost the market in iron ore exports from Goa after a court stay on mining in 2018. Such setbacks need to be avoided. India has great potential in sectors like agriculture, textiles, pharmaceuticals, steel, and MSME products. The revival of the global economy is an opportunity for these sectors to thrive. Ensuring access to cheap working capital and complying with emission norms will enhance their export capabilities,” Sharma explained.
Since the 1991 reforms, India’s trade relations have significantly transformed, with increased exports to key markets like the US, Europe, and Asia. Narasimhan highlighted the exploration of newer markets such as Montenegro, Turkmenistan, Mongolia, and Honduras.
“The key reasons for the stellar export performance are the sharp recovery in key markets, increased consumer spending, accumulated savings, disposable income due to fiscal stimulus by major economies, global commodity price rises, and an aggressive export push by the government,” Narasimhan said.
India’s progress as a global export hub, coupled with increasing free trade agreements (FTAs) with major nations and entities, is expected to strengthen trade relationships in line with changing consumer trends and market dynamics.

June 11, 2024
Leading Handset Body Urges New Government for Robust Policy to Quadruple Electronics Sector Output in 5 Years

Leading Handset Body Urges New Government for Robust Policy to Quadruple Electronics Sector Output in 5 Years

The Indian Cellular and Electronics Association (ICEA), representing major players like Apple, Foxconn, Dixon, Xiaomi, Oppo, Vivo, and others, emphasizes that the new government should focus on establishing a robust and predictable policy framework. This framework should incentivize domestic manufacturing, attract global investments, and scale up India’s electronics manufacturing sector to integrate with global value chains (GVCs).
“To make India a significant player in the global value chain (GVC) in the electronics sector, a mission-mode approach with clear goals and timelines is crucial. Our target to quadruple the sector’s output in the next five years requires coordinated efforts across multiple ministries and continuous engagement with industry leaders,” said Pankaj Mohindroo, chairman of ICEA.
ICEA stresses the importance of building Indian Champion companies. Mohindroo highlighted the necessity of a predictable regulatory environment to foster innovation and growth in the electronics sector. “Creating a robust policy framework that incentivizes domestic manufacturing and attracts global investments is essential. The new administration needs comprehensive reforms to make India more competitive with countries like Vietnam and China, boosting our manufacturing and export capabilities.”
Mohindroo urged the new government to prioritize scaling up India’s electronics manufacturing sector to align with GVCs. This involves enhancing competitiveness by improving infrastructure, streamlining regulatory processes, and attracting foreign direct investment.
“Sustainable growth and employment opportunities require a collaborative approach between industry stakeholders and policymakers. GVCs should be the highest priority since 90% of global electronics trade is with them. We need to make our nation the best location for GVCs to do business,” he added.
Introducing virtual GVC trade clusters could streamline manufacturing processes, attract more investments, and enhance export potential. “An appropriate PLI for components, sub-assemblies, wearables, and hearables will drive domestic value addition and attract new investments. Comprehensive reforms are needed to make India more competitive with countries like Vietnam and China,” Mohindroo stated.
Currently, India accounts for only 3-4 percent of global electronics manufacturing, despite having a large domestic market. Over the past decade, electronic components manufacturing in India grew at a 13 percent CAGR, trailing the overall electronic manufacturing industry growth of 19 percent CAGR.
The Indian electronics manufacturing industry witnessed a significant four-fold increase from $25 billion in FY13 to $100 billion in FY23, driven by the aim to reduce dependence on imports of finished goods. This translates to a 19 percent CAGR over the past decade, equivalent to 78 percent of the Indian electronics market. The Government of India (GOI) has also set an ambitious target for the industry to reach $300 billion by FY26.

June 7, 2024
India now has 4.5 crore registered MSMEs of which 98% are micro enterprises

India now has 4.5 crore registered MSMEs of which 98% are micro enterprises

Of the 4.5 crore MSMEs, 4.4 crore or 98.1 per cent enterprises were micro units followed by 7.04 lakh small enterprises and 67,266 medium enterprises.
The total number of micro, small and medium enterprises (MSMEs) in the country registered with the MSME Ministry has crossed the 4.5 crore mark. According to the data from the government’s Udyam registration portal launched on July 1, 2020, to ease registration of small businesses in the country, 4,50,64,147 units were registered with the MSME Ministry, at the time of filing this report.
Of the 4.5 crore MSMEs, 4.4 crore or 98.1 per cent enterprises were micro units followed by 7.04 lakh small enterprises and 67,266 medium enterprises. The micro enterprise count also included 1.86 crore micro enterprises outside the ambit of the Goods and Services Tax (GST) such as street vendors, registered via the Udyam Assist Platform launched in January 2023.
Importantly, according to the 2015-16 national sample survey by the government, India has 6.33 lakh crore unincorporated non-agriculture MSMEs. The current count of registered MSMEs indicates that 71 per cent of unincorporated non-agri MSMEs are now in the formal economic fold.
Before Udyam registration, the government had the Udyog Aadhaar Memorandum (UAM) and prior to that Entrepreneurs Memorandum (EM-II) in place for MSME registration. According to the MSME Ministry’s 2020-21 annual report, 21,96,902 EM-II filings were recorded during the 2007-2015 period while from September 2015 till June 30 2020, there were 1,02,32,451 (1.02 crore) UAM registrations.
The Udyam registration for MSMEs offers benefits including registration on the government’s e-commerce marketplace GeM, delayed payment monitoring portal Samadhaan, onboarding on the TReDS platform for invoice discounting, availing schemes such as credit guarantee scheme, public procurement, priority sector lending from banks and more.
However, wholesale and retail traders registering for Udyam certification are limited to the benefits of priority sector lending.
According to the details from the Udyam portal, the registered MSMEs have so far reported 19.5 crore jobs and the number of women employees is over 4.3 crore.

June 6, 2024
DoT Launches Baseline Survey for MSMEs, Emphasizing Digital Evolution with 5G

DoT Launches Baseline Survey for MSMEs, Emphasizing Digital Evolution with 5G

The Department of Telecommunications (DoT) has invited proposals from organizations and startups to develop a comprehensive Industry 4.0 baseline survey focused on the digital transformation of India’s MSME sector through 5G technologies. This survey aims to evaluate the current readiness of MSMEs in the manufacturing sector for Industry 4.0, identifying areas for improvement and prioritizing investments.
Industry 4.0 represents a major transformation in manufacturing, driven by advanced technologies like artificial intelligence, the Internet of Things (IoT), and cloud computing to boost efficiency, productivity, strategy, and competitiveness. The Telecom Centre of Excellence India, a public-private partnership initiative, is spearheading the survey to understand the challenges MSMEs face in adapting to these technologies.
“The survey aims to establish a robust ecosystem that can leverage the capabilities of 5G and 6G networks. This includes identifying sector-specific needs in at least 10 sectors, recognizing the diverse landscape of MSMEs, and providing targeted support to foster innovation and competitiveness,” the department stated.
The survey is designed to address immediate barriers to digital transformation and pave the way for the integration of cyber-physical systems through 5G and 6G technologies, driving sustainable growth across sectors. It will cover five sectors each in the northern and southern parts of India over a 60-day period. The key recommendations from the survey will inform policy interventions to achieve the transformative adoption of Industry 4.0, enhancing the competitive positioning and survivability of MSMEs.

June 6, 2024
Holani Group Secures ₹184 Crore for New SME-Focused Fund

Holani Group Secures ₹184 Crore for New SME-Focused Fund

The Holani Group has entered the fund management and investment sector following the Securities and Exchange Board of India (SEBI) approval for its Alternate Investment Fund earlier this year. Jaipur-based merchant banker and stockbroker Holani Consultants has raised ₹184 crore for its new SME-focused ₹300 crore fund, launched in late April.
The fund includes a greenshoe option to retain an additional ₹100 crore.
“With our sector-agnostic strategy, we aim to create long-term value for our clients while fostering innovation, entrepreneurship, and economic growth in India through our fund,” said Ashok Holani, Director of Holani Consultants Private Limited.
The venture capital fund, Holani Venture Capital Fund Category I AIF (Alternate Investment Fund), is an Indian growth capital private equity fund managed and sponsored by Holani Capital Advisors. The fund is now registered under SEBI as a Category I AIF – Venture Capital Fund.
The fund offers investment opportunities to individuals, including high net worth individuals, corporates, institutional investors, financial institutions, family offices, insurance companies, foreign investors, other alternative investment funds, and other permissible investors.

June 5, 2024
Exploring the Impact of India’s Evolving GCC Landscape on Fintech Innovation for SME Sector Growth

Exploring the Impact of India’s Evolving GCC Landscape on Fintech Innovation for SME Sector Growth

Through inventive strategies and cooperative endeavors, Global Capability Centers (GCCs) are playing a pivotal role in developing pioneering products and services aimed at fostering financial inclusivity.
Initially established to capitalize on India’s cost-effectiveness, GCCs have evolved into crucial hubs for driving innovation and development across various sectors. Leveraging India’s technological prowess and skilled workforce, these centers offer a spectrum of services, including tech research, finance, audit, and operational support for their parent organizations worldwide.
The SME sector has long grappled with limited access to credit. Fintech innovation, powered by advanced technologies like artificial intelligence (AI), machine learning (ML), blockchain, and big data analytics, holds the key to addressing this challenge. With access to a diverse talent pool comprising engineers, data scientists, and banking experts, GCCs are well-positioned to lead innovation in areas such as digital payments, lending, risk management, and customer engagement. This influx of talent not only benefits multinational corporations but also enriches the broader finance ecosystem on a global scale.
For instance, JP Morgan’s Bengaluru global service center is expanding its scope to develop digital transformation solutions for its global operations. The team in India has created Story, a platform facilitating commercial real estate management, rent processing, market analysis, and tenant screening for smaller multifamily owner-operator businesses.
GCC-driven advancements enable the swift delivery of customer-centric personalized solutions, streamline banking platforms, and transform payment and lending solutions. These digital innovations are particularly beneficial for small businesses, which often require timely access to capital to seize growth opportunities or address cash flow challenges.
Moreover, GCCs foster knowledge sharing and collaboration among diverse business units. NatWest’s India centers, for example, collaborate closely with UK teams on core engineering projects, driving digital transformation and enhancing accessibility to banking services for customers.
Additionally, GCCs and fintech companies in the BFSI sector collaborate in areas such as digital lending, payments, and risk monitoring to adapt to the evolving financial landscape. GCCs prioritize upskilling their talent in emerging tech areas to stay abreast of evolving technologies.
In conclusion, India’s GCCs are driving digital transformation and fostering financial inclusion through innovative strategies and collaborative efforts, shaping the fintech landscape to better serve the needs of SMEs and other stakeholders.

June 3, 2024
Why Sustainability Reporting Matters for SMEs

Small Business, Big Impact: Why Sustainability Reporting Matters for SMEs

A new guide from ACCA (the Association of Chartered Certified Accountants) recognizes the vital role Small and Medium-sized Enterprises (SMEs) play in global supply chains. Their guide, titled “Sustainability Reporting – SME Guide,” empowers SMEs to create the sustainability reports increasingly demanded by regulators and stakeholders.
Sundeep Jakhar, head of public affairs for ACCA in India, emphasizes the importance of sustainability practices for Indian SMEs, which make up a significant portion of the Indian business landscape. He acknowledges their unique challenges, such as limited resources, but highlights the numerous benefits sustainability reporting can unlock, including access to new markets and better financing opportunities. This translates to improved competitiveness on a global scale for Indian SMEs, helping them align with international standards.
Report co-author Sharon Machado, head of sustainable business at ACCA, explains that creating and using sustainability information empowers SMEs, their advisors, and stakeholders to identify opportunities, manage risks, and ultimately strengthen their financial position. This translates to easier investment attraction, preferential terms with suppliers, and a competitive edge in the talent pool.
As the demand for sustainability information rises, all organizations, including SMEs (which comprise 90% of all organizations globally), need to be prepared to provide information on their approach to managing sustainability risks and opportunities. This information is crucial for regulators, investors, and other stakeholders throughout the value chain.
The ACCA guide highlights the competitive advantage SMEs can gain by communicating and using sustainability information. Report co-author Aaron Saw, head of corporate reporting insights at ACCA, acknowledges the challenges SMEs might face, especially financially. However, he emphasizes that evidence shows the effort is worthwhile. The ACCA encourages all SMEs to take small but crucial first steps towards creating sustainability reports, paving the way for a stronger and more competitive business.

You can read here to learn more: https://smefutures.com/sustainability-related-information-enables-better-business-for-smes-says-new-guide-from-acca/

May 30, 2024
Recordent Announces 100+ Meets to Connect 10,000 Indian SMEs Nationwide

Recordent Announces 100+ Meets to Connect 10,000 Indian SMEs Nationwide

HYDERABAD: Fintech firm Recordent announced on Thursday its plan to host over 100 Knowledge Meets, engaging with more than 10,000 SMEs across India. These events aim to analyze and streamline payment collection practices for the SME sector, addressing challenges in cash flow management and credit awareness. The initiative will kick off with inaugural events in Mumbai, Hyderabad, and Delhi.
Recordent highlighted that over 90% of SMEs face significant payment delays, affecting business operations and continuity. By collaborating with industry associations, startups, enterprise unions, and SME executives, Recordent seeks to tackle collection issues within the industry. Discussions will focus on adopting new industry practices to improve accounts receivable collections and manage credit exposure and risk using payment data.
These events will also serve as valuable networking platforms, allowing participants to gain insights and build connections within the industry.
Winny Patro, CEO of Recordent, stated, “Over 90% of Indian SMEs face cash flow challenges due to extending credit to buyers, hindering growth and increasing failure rates. Our SME outreach strategically addresses this challenge head-on. By providing a comprehensive suite of solutions, from checking buyers’ credit history to managing defaults, we are committed to empowering SMEs to navigate cash flow challenges and seize growth opportunities.”
Recordent offers a comprehensive suite of accounts receivable collections and credit risk management solutions. This includes payment reminder automation, invoice management, CIBIL-like credit registry reporting of defaults, cautionary and legal notices for recovery, collections analytics for informed decision-making, and credit bureau reports for credit assessment.

May 30, 2024
CRISIL SME Tracker: Higher demand, PLI to propel electronics MSMEs in FY25

CRISIL SME Tracker: Higher demand, PLI to propel electronics MSMEs in FY25

Various factors contributed to the growth, such as increasing penetration of internet and 5G services, rising consumer income, shorter replacement cycles, easier payment terms
Domestic consumption of electronics items is estimated to have grown 13-15 per cent to Rs 14-15 trillion in the financial year ended March 31, 2024 (FY24), with mobile phones and consumer and industrial electronics accounting for 50-55 per cent of the pie.
Various factors contributed to the growth, such as increasing penetration of internet and 5G services, rising consumer income, shorter replacement cycles, easier payment terms, and developments in the auto, electric vehicle, and power segments.
In FY25, overall electronics consumption growth is expected to moderate to 10-12 per cent as inflation marginally affects sales of mobile phones and consumer durables, which account for 40 per cent of electronics consumption in the country.
Electronics production, however, is expected to grow 15-20 per cent, largely owing to the production-linked incentive scheme (PLI) that is encouraging manufacturing of mobile phones, white goods, information technology hardware, and solar photovoltaic cells and modules.
That augurs well for the micro, small and medium enterprises (MSMEs) that produce electronics components and assemble consumer and industrial electronics products.
The MSME units account for 25-35 per cent of the industry’s consumption of components. These units are expected to log a revenue growth of 11-13 per cent year-on-year (Y-o-Y) in FY25, driven by mobile phones, consumer and industrial electronics, computer hardware, and strategic electronics.
As for margins, following a range-bound performance in FY24, the MSMEs are expected to experience a slight contraction of up to 30 basis points in FY25, primarily because of commodity prices.

May 29, 2024
Public Procurement: Government Purchase of MSME Goods Reaches Record High in FY24

Government Purchase of MSME Goods Reaches Record High in FY24

In the financial year 2023-24, central public sector enterprises (CPSEs) set a new record in the procurement of goods and services from micro and small enterprises (MSEs). According to the MSME Ministry’s public procurement monitoring portal, MSME Sambandh, CPSEs procured goods worth Rs 75,253 crore from MSEs in FY24, marking a 16.2 percent increase from Rs 64,721 crore in FY23.
Under the procurement policy, CPSEs are required to source at least 25 percent of their total procurement value from MSEs each year, with specific allocations: 4 percent from MSEs owned by SC/ST entrepreneurs and 3 percent from those owned by women entrepreneurs.
The updated data on the portal, as of April 11, showed FY24 procurement at Rs 58,744 crore, indicating a significant update in the government’s figures. Earlier reports had shown a decline based on the available data at that time.
In FY24, purchases from MSEs accounted for 35.6 percent of the total procurement, benefiting 2.18 lakh enterprises, compared to 37.1 percent in FY23, which involved 2.36 lakh enterprises.
Procurement from SC/ST and women entrepreneurs amounted to Rs 1,406 crore (0.67 percent) and Rs 2,609 crore (1.24 percent) respectively, within the 25 percent minimum procurement share from MSEs. Comparatively, FY23 saw slightly higher procurement from SC/ST entrepreneurs at Rs 1,546 crore but lower from women-led MSEs at Rs 2,318 crore.
Additionally, the Government eMarketplace (GeM), the commerce ministry’s e-commerce portal, reported over Rs 4 lakh crore in gross merchandise value (GMV) for FY24, doubling the Rs 2 lakh crore GMV of FY23. The order volume for FY24 was 62.79 lakh.
The success of GeM has drawn interest from other countries in Asia and Africa, looking to emulate the model. As reported earlier, GeM is the third-largest public procurement platform globally, following South Korea’s KONEPS and Singapore’s GeBIZ.

May 28, 2024