A policy opening for MSMEs
Factories can produce and governments can incentivise. But unless distribution channels allow MSMEs to connect seamlessly with international consumers, India’s supply chain promise risks stalling.
This is where a new policy opening matters. The government has floated an initiative to allow foreign direct investment in inventory-based retail for MSME exports. Put simply, it would let global e-commerce players directly source goods from Indian small businesses for international markets. For an MSME in Tiruppur, this could mean bypassing layers of intermediaries and plugging straight into global demand.
If done right, this reform could be as transformative as the earlier FDI moves that opened up India’s digital payments and telecom sectors. It would shift the focus from “making in India” to “shipping from India.”
Platforms as springboards
E-commerce platforms are already showing what this could look like. Thousands of Indian firms – from handicraft exporters in Rajasthan to home décor makers in Moradabad – sell directly to buyers in the US, Europe, and Japan through global marketplace programmes.
Take, for example, a handloom cooperative in Tamil Nadu that has been able to ship bed linen directly to American households by listing on a digital marketplace, while a carpet exporter from Bhadohi found new demand after partnering with a state-supported export hub. These stories highlight a common thread: platforms and export networks provide the bundled logistics, payments, and compliance support that MSMEs cannot build alone. For small firms, this can make the difference between being confined to local markets and reaching customers in 200 countries.
The distribution gap – and how to close it
MSMEs account for nearly half of India’s exports and a third of GDP. Yet most are still boxed in domestically because direct exporting remains prohibitively complex. Customs paperwork, compliance demands, currency risks, and the challenge of building credibility abroad add costs that small firms cannot bear.
That is why the government’s FDI move matters. By explicitly allowing global e-commerce players to hold inventory for MSME exports, the reform would make distribution as central to policy as production. Instead of waiting for trade corridors or export parks to catch up, India can ride on the global networks platforms have already built.
Other countries have taken similar routes. Vietnam plugged into multinational buyers like Samsung, which helped local firms integrate into supply chains. Chinese SMEs in the early 2000s used Alibaba and other intermediaries before homegrown logistics champions emerged. The pattern is clear: you start by leveraging existing global platforms, then gradually build complementary systems.
India’s ONDC is part of this story too – an open, interoperable layer that can lower entry costs for small firms. But ONDC is still nascent. For now, international buyers will continue to prefer established platforms with proven reach. The policy task is to make sure MSMEs can access all of these routes – public, private, cooperative – without being trapped in dependency.
Opening pathways to global buyers
If India wants MSMEs to compete internationally, distribution must be treated as seriously as production. Customs and compliance need to be simplified. MSMEs need greater support in digital skills and export-readiness. And competition between multiple distribution routes – digital platforms, export cooperatives, and state-backed hubs – must be encouraged.
The government’s FDI initiative is a recognition that having global distribution avenues for Indian products is now a strategic imperative. By anchoring MSMEs directly in global e-commerce networks, it could give small firms the scale and credibility they need abroad. But success will depend on execution: ensuring fair terms for sellers, transparency in fees, and interoperability so that no single route dominates.
The balance ahead
India already knows how to manufacture competitively. With FDI liberalisation, export-focused e-commerce, and open digital rails like ONDC, India has the chance to build a distribution mix that finally lets its MSMEs step onto the global stage.
That is the infrastructure test India must pass. Not just moving goods, but moving small businesses into the future of trade. For MSMEs, distribution will be destiny.
(Views are personal)
