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Indian MSME Exporters Amid Global War Conditions

By Eram Shaikh --
Tuesday, 24 Jun, 2025

India’s Micro, Small, and Medium Enterprises (MSMEs) are the backbone of its export economy, contributing 45.79% to total exports in 2024-25, a slight rise from 45.73% in 2023-24. Employing over 110 million workers and accounting for 30% of GDP, MSMEs are critical to India’s global trade ambitions. However, ongoing geopolitical conflicts, including the Russia-Ukraine war and escalating tensions in West Asia, present both formidable challenges and unique opportunities for these exporters.

The Russia-Ukraine conflict, now in its third year, has disrupted global supply chains, affecting MSME exporters that rely on stable trade routes. In 2022, industry bodies like FISME reported a 20-30?mand drop in key markets such as the US and Europe, with sectors like hand tools, auto components, and textiles operating at 25-60?pacity. Soaring crude oil prices, which spiked over 70% in 2022, inflated input costs, contributing to a trade deficit of $31 billion in October 2022. Freight costs have also surged due to Red Sea disruptions, with a 2024 estimate suggesting a $30 billion export loss as ships are rerouted via longer paths, doubling shipping rates for MSMEs.

Despite these headwinds, MSME exporters have shown remarkable resilience. Export volumes climbed from ₹3.95 lakh crore in 2020-21 to ₹12.39 lakh crore in 2024-25, with the number of exporting MSMEs growing from 52,849 to 1,73,350. Government initiatives have been instrumental, including simplified licensing, a ₹2,250 crore export promotion budget, and credit guarantees up to ₹10 crore. E-commerce platforms like Amazon’s Global Selling and IndiaMart have empowered over 100,000 MSMEs to reach 300 million global customers, with e-commerce exports projected to hit $20 billion by 2025. Sectors like handicrafts, apparel, and defence products, including drones and simulators, have tapped new markets in Africa, Southeast Asia, and Latin America, capitalising on trade pacts like India-ASEAN and India-UAE.

Yet, significant hurdles remain. Only 0.95% of India’s 6.3 crore registered MSMEs engage in exports, limited by non-tariff barriers, complex compliance norms, and inadequate market intelligence. Rising energy costs and geopolitical uncertainties further strain competitiveness. For instance, the EU’s Carbon Border Adjustment Mechanism poses a compliance burden for MSME exporters of steel and aluminium. Additionally, fluctuating currency rates and delayed payments from conflict-affected regions add financial stress.

To counter these challenges, the government is promoting digitalisation through platforms like the Open Network for Digital Commerce (ONDC) and offering training in export documentation. Industry experts urge MSMEs to adopt sustainable practices and diversify supply chains to mitigate risks. By leveraging technology and policy support, MSMEs can enhance their global footprint.

Indian MSME exporters stand at a pivotal juncture. Their adaptability, bolstered by robust government backing, equips them to navigate war-induced disruptions. By embracing innovation, diversifying markets, and strengthening digital capabilities, they can elevate India’s export share to 60% by 2030, solidifying their role in the global trade ecosystem.

Indian MSME Exporters Amid Global War Conditions. India’s Micro, Small, and Medium Enterprises (MSMEs) are the backbone of its export economy, contributing 45.79% to total exports in 2024-25, a slight rise from 45.73% in 2023-24. Employing over 110 million workers and accounting for 30% of GDP, MSMEs are critical to India’s global trade ambitions. However, ongoing geopolitical conflicts, including the Russia-Ukraine war and escalating tensions in West Asia, present both formidable challenges and unique opportunities for these exporters.

The Russia-Ukraine conflict, now in its third year, has disrupted global supply chains, affecting MSME exporters that rely on stable trade routes. In 2022, industry bodies like FISME reported a 20-30?mand drop in key markets such as the US and Europe, with sectors like hand tools, auto components, and textiles operating at 25-60?pacity. Soaring crude oil prices, which spiked over 70% in 2022, inflated input costs, contributing to a trade deficit of $31 billion in October 2022. Freight costs have also surged due to Red Sea disruptions, with a 2024 estimate suggesting a $30 billion export loss as ships are rerouted via longer paths, doubling shipping rates for MSMEs.

Despite these headwinds, MSME exporters have shown remarkable resilience. Export volumes climbed from ₹3.95 lakh crore in 2020-21 to ₹12.39 lakh crore in 2024-25, with the number of exporting MSMEs growing from 52,849 to 1,73,350. Government initiatives have been instrumental, including simplified licensing, a ₹2,250 crore export promotion budget, and credit guarantees up to ₹10 crore. E-commerce platforms like Amazon’s Global Selling and IndiaMart have empowered over 100,000 MSMEs to reach 300 million global customers, with e-commerce exports projected to hit $20 billion by 2025. Sectors like handicrafts, apparel, and defence products, including drones and simulators, have tapped new markets in Africa, Southeast Asia, and Latin America, capitalising on trade pacts like India-ASEAN and India-UAE.

Yet, significant hurdles remain. Only 0.95% of India’s 6.3 crore registered MSMEs engage in exports, limited by non-tariff barriers, complex compliance norms, and inadequate market intelligence. Rising energy costs and geopolitical uncertainties further strain competitiveness. For instance, the EU’s Carbon Border Adjustment Mechanism poses a compliance burden for MSME exporters of steel and aluminium. Additionally, fluctuating currency rates and delayed payments from conflict-affected regions add financial stress.

To counter these challenges, the government is promoting digitalisation through platforms like the Open Network for Digital Commerce (ONDC) and offering training in export documentation. Industry experts urge MSMEs to adopt sustainable practices and diversify supply chains to mitigate risks. By leveraging technology and policy support, MSMEs can enhance their global footprint.

Indian MSME exporters stand at a pivotal juncture. Their adaptability, bolstered by robust government backing, equips them to navigate war-induced disruptions. By embracing innovation, diversifying markets, and strengthening digital capabilities, they can elevate India’s export share to 60% by 2030, solidifying their role in the global trade ecosystem.