India is taking a strategic step forward in reshaping its global trade policy to strengthen the position of micro, small, and medium enterprises (MSMEs) in the global marketplace. With trade negotiations underway with major partners such as the United States and the European Union, India is seeking to incorporate MSME-centric provisions, drawing inspiration from the recent Free Trade Agreement (FTA) with the United Kingdom.

The Ministry of Commerce and Industry has indicated that ensuring better access, support, and opportunities for MSMEs is now a cornerstone of India’s international trade policy. An official from the Ministry, speaking on the condition of anonymity, said that the primary goal is to enhance cooperation and information sharing, enabling Indian MSMEs to be more competitive and more active participants in bilateral trade and investment frameworks.

Learning from the India-UK Trade Agreement

India’s recent trade agreement with the United Kingdom included specific chapters dedicated to MSMEs, recognising their importance to economic growth, employment, and innovation. Some of the key provisions included:

• Creation of digital portals to share trade-related information useful to small enterprises

• Cooperation between trade promotion agencies

• Commitments to reduce non-tariff barriers and simplify compliance processes

• Mutual support in identifying market access opportunities

• Bilateral workshops and networking platforms for MSMEs

Officials now want similar carve-outs in all major trade agreements, particularly the upcoming India-US and India-EU trade deals, to ensure MSMEs can scale up exports and participate in global supply chains.

Why MSMEs Are Crucial to India’s Trade Vision

India’s MSME sector is often described as the backbone of the Indian economy. With over 63 million MSMEs contributing nearly 30% to the country’s GDP and more than 48% to exports, the sector is vital for both domestic industrial growth and foreign trade.

However, Indian MSMEs face several challenges:

• Lack of access to international markets

• Insufficient knowledge of foreign trade procedures and standards

• Compliance and certification hurdles

• Difficulty in meeting logistics, packaging, and digital infrastructure standards

• Limited awareness of overseas demand trends

By addressing these issues in trade policy frameworks, India hopes to bridge the global competitiveness gap for small businesses.

What India Hopes to Achieve in the US and EU Trade Talks

The India-US Trade Policy Forum (TPF) and the India-EU FTA negotiations are currently focused on multiple pillars — including market access, digital trade, sustainability, and investment. But now, Indian negotiators are pushing for a dedicated focus on MSMEs.

Some proposed MSME-focused features under discussion include:

• Dedicated MSME help desks at Indian embassies and trade missions in the US and EU

• Provisions for technical and vocational training exchanges

• Digital platforms for connecting MSMEs with foreign buyers and partners

• Commitments to reduce customs processing time for small business shipments

• Lower certification costs through mutual recognition agreements (MRAs)

• Funding schemes for technology adoption in small-scale export units

According to policy observers, such provisions would not only open new doors for Indian MSMEs but also strengthen India’s trade partnerships by making them more inclusive.

Global Examples of MSME Support in Trade

India is not alone in focusing on small enterprises in trade policy. Across the world, nations are increasingly acknowledging the role of MSMEs in global trade:

• The United States-Mexico-Canada Agreement (USMCA) includes a specific MSME chapter, encouraging cooperation and transparency.

• The EU-Japan Economic Partnership Agreement contains provisions to simplify rules of origin and export paperwork for small firms.

• Australia and New Zealand, in their regional trade deals, often include clauses for startups and early-stage exporters.

India now wants to align itself with these global practices, ensuring its small business ecosystem benefits from the same opportunities as larger corporations.

Domestic Readiness: What India Is Doing Internally

While India pushes for MSME inclusion in trade deals, it is also ramping up internal support systems to prepare these enterprises for global markets. Some key initiatives include:

1. UPLIFTING DIGITAL TRADE PLATFORMS: The Open Network for Digital Commerce (ONDC) and India Trade Portal are being promoted as gateways for MSMEs to access digital buyers globally.

2. EXPORT FACILITATION SCHEMES: Programmes like Niryat Bandhu Scheme, Market Access Initiative (MAI), and Export Credit Guarantee Scheme (ECGC) aim to lower the cost and risk of exporting.

3. SECTOR-SPECIFIC EXPORT HUBS: The One District One Product (ODOP) initiative identifies region-specific products and connects them to overseas markets with branding and support.

4. INFRASTRUCTURE UPGRADES: Through PM Gati Shakti, India is investing in better logistics infrastructure, which will particularly benefit MSMEs struggling with delivery and transport costs.

5. GREEN AND SUSTAINABLE EXPORT TRAINING: MSMEs are being trained to align with European Green Deal requirements, such as sustainability certifications, energy efficiency, and ESG reporting.

6. TRADE PROMOTION COUNCILS: The Federation of Indian Export Organisations (FIEO) and India SME Forum are working closely with the Commerce Ministry to offer webinars, guides, and B2B events to MSME exporters.

Challenges Ahead

Despite these promising moves, several systemic hurdles remain:

• High cost of compliance with global quality standards

• Fragmented information sources for small businesses

• Language and documentation barriers

• Difficulties in accessing finance for exports

• Low awareness of foreign demand dynamics

If trade deals include MSME-enabling clauses, they must also be backed by capacity-building programmes on the ground. Without effective last-mile implementation, policy commitments could remain underutilised.

Moreover, digitisation, financial literacy, and IPR awareness will need to be significantly scaled among MSME clusters across India.

Industry and Expert Reactions

Industry leaders and policy experts are welcoming this strategic focus on MSMEs.

Dr. Ajay Sahai, Director General of FIEO, noted:

“It’s time Indian trade deals reflect the role MSMEs play. If we want inclusive trade growth, these features must go beyond rhetoric.”

Anil Bhardwaj, Secretary General of the Federation of Indian Micro and Small & Medium Enterprises (FISME), added:

“Carving space for MSMEs in FTAs sends a strong message. It’s the only way to democratise India’s trade policy.”

Exporters from sectors like textiles, handicrafts, processed foods, gems and jewellery, and IT services are particularly keen on seeing how the EU and US negotiations incorporate MSME welfare.

Future Outlook

India’s negotiation strategy in global trade is undergoing a subtle but impactful shift — from focusing solely on tariff reductions and market access for large players to ensuring inclusion of smaller actors.

The UK agreement has set a template. Going forward, India must:

• Push for concrete deliverables in the US and EU FTAs, beyond vague intentions

• Ensure follow-through at the ground level via Indian embassies, trade fairs, and handholding schemes

• Build cross-border MSME networks through chambers of commerce and diaspora linkages

• Create MSME-specific trade performance dashboards to track outcomes

If these measures are successfully implemented, India’s MSMEs will be empowered to move from local to global, strengthening not only their own futures but also the resilience of the Indian economy as a whole.

Conclusion

In a rapidly evolving global economic landscape, India's effort to include MSME-focused clauses in its trade agreements is both timely and necessary. By ensuring that trade deals are not just pro-business but pro-small business, India is aligning its international economic ambitions with its domestic development goals.

If the country can effectively implement these provisions, both within and beyond its borders, the result will be a more inclusive, competitive, and export-ready MSME sector — one that can hold its own on the global stage.

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