Indian SMEs in Global Value Chains: Status, Issues and Way Forward

Abstract

Small and medium enterprises (SMEs) account for bulk of the enterprises in most countries and play a crucial role in global value chains (GVCs). In India, micro, small and medium enterprises (MSMEs) constitute around 30% of the gross domestic product (GDP), accounts for 50% of exports and a major share in employment. Under the Aatmanirbhar Bharat Abhiyan, the Central government intends to enhance the share of MSMEs in exports to 60% in the next 5 years. The government also plans to increase the contribution of the MSMEs to 40% of the GDP. In this context, this article examines how effective the government policies have been in the past 10 years to help Indian MSMEs integrate in the GVCs. It first presents an overview of the MSMEs in India, focusing on their exports and global market integration. It then examines the schemes and policies of the Ministry of Micro, Small and Medium Enterprises, and provides an empirical estimation (2000–2001 to 2020–2021) of the impact of government schemes/programmes on MSMEs integration in the GVCs. Based on key informant interviews, it identified the core issues faced by the MSMEs and makes recommendation on how to address them, so that, the targets set by the government for enhancing the contribution of the sector to GDP and exports can be achieved. JEL Codes: F10, G28, O10, O20, O57