Analyzing the potential market for MSMEs in India

Abstract

This paper summarizes the arguments and counterarguments within the scientific discussion on identifying the potential markets for Micro Small and Medium Enterprises (MSMEs). The main purpose of the research is to present the commodities and potential destinations that Indian MSMEs can tap on to broaden their business and eventually to the overall growth of the country. Systematization of the literary sources as a part of the study indicates that MSMEs have made a significant contribution to the country’s GDP and trade. A survey of the approaches for solving the objective of the research reveals that trade indices and CGE models are the most appropriate when it comes to trade policy analysis. The relevance of this scientific problem decision is that Indian MSME’s contribute to more than 30% of India’s GDP and enhancing MSME exports would help the country achieve an inclusive, socio-economic growth. Investigation of the topic in the paper is carried out in the following logical sequence: We first analyze the commodities that have a potential for growth and then move ahead to analyze the promising markets. To perform quantitative analysis, we use trade indices and estimations from Computable General Equilibrium -GTAP (Global Trade Analysis Project) model. To analyze potential commodities, we use Product Space Analysis with three indicators, namely, the Revealed Comparative Advantage (RCA), Revealed Trade Advantage (RTA), and Market Demand Index. To analyze the potential markets, we use the Export potential indicator and GTAP estimates for the years 2022-27. The object of the research is to empower MSMEs in India with insights and data about the potential markets and commodities for export from India. The paper shows that MSMEs have a higher potential for exports in textiles and clothing, food products, vegetables, and other agricultural products, and machinery and electrical equipment sectors. In terms of markets, our analysis reveals that MSMEs have a broad scope in the UAE, China, Bangladesh, and the USA.