Can Indian MSMEs Fully Capitalize on the FTA Opportunity?

Indian MSME exporters stand at a crucial point as India expands its network of free trade agreements.

Prime Minister Narendra Modi has urged smaller enterprises to use these trade pacts to expand the global reach of Indian products.

This is to further integrate with international value chains and strengthen competitiveness. India has finalized FTAs with about 40 countries since 2014, creating opportunities across sectors including textiles, machinery and medicines.

However, exporters say the bigger challenge lies in converting preferential market access into actual export orders.

Businesses must also meet rules of origin, product standards and market-specific requirements across different destinations.

Key Highlights

• India has finalized FTAs with about 40 countries since 2014.
• MSMEs account for 35.4 per cent of manufacturing, 48.58 per cent of exports and 31.1 per cent of GDP.
• More than 7.47 crore enterprises employ over 32.82 crore people.
• FTAs can help MSMEs access larger markets and integrate with global value chains.

PM Modi Pushes MSMEs to Leverage India’s FTA Network

Prime Minister Narendra Modi has urged Indian MSMEs to fully leverage India’s growing FTA network and expand the international reach of Indian products. Speaking on the 80th Independence Day, he said India has finalized FTAs with about 40 countries since 2014, creating a major opportunity for smaller businesses.

The Prime Minister specifically highlighted products such as textiles, machinery and medicines, calling for greater presence of Indian goods in international markets. The FTA push comes as India seeks to strengthen manufacturing, generate employment and improve the global competitiveness of domestic businesses.

For an Indian MSME, an FTA can reduce or eliminate import duties in partner markets, potentially improving price competitiveness. However, the agreements alone do not guarantee export growth. Exporters say businesses must understand the provisions and convert preferential access into actual orders.

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MSMEs Already Account for Nearly Half of India’s Exports

Indian MSMEs hold a substantial position in the country’s manufacturing and export economy. The sector contributes approximately 35.4 per cent of India’s manufacturing, 48.58 per cent of exports and 31.1 per cent of GDP.

The sector includes more than 7.47 crore enterprises, which together employ over 32.82 crore people. This makes MSMEs India’s second-largest employment generator after agriculture.

The sector also carries significant global weight. Worldwide, MSMEs account for around 90 per cent of businesses and more than 50 per cent of total global employment. For Indian MSMEs, therefore, greater access to international markets could create opportunities for higher exports, production expansion and deeper participation in global supply chains.

FTA Access Must Translate Into Export Orders

The central challenge for Indian MSMEs now lies in FTA utilization. Federation of Indian Export Organizations (FIEO) Director General Ajay Sahai said FTAs extend beyond tariff concessions because they can help MSMEs enter global value chains, reach larger markets and strengthen competitiveness.

However, businesses need practical knowledge to use these agreements effectively. Rules of origin, product standards and market-specific requirements can determine whether an exporter actually receives the benefits available under an FTA.

FIEO plans to work with MSMEs to improve awareness of these rules, standards and market opportunities. Such support can help smaller enterprises take Indian products and brands into overseas markets with greater confidence.

India Expands Its Network of Trade Agreements

India has recently implemented FTAs with the UAE, Mauritius, Australia, the UK, the European Free Trade Association (EFTA) bloc and Oman. The country has also finalized trade agreements with the 27-nation European Union and New Zealand, further expanding the potential market available to Indian exporters.

These agreements generally reduce or eliminate import duties across a large share of goods traded between partner economies. For an Indian MSME, lower tariffs can improve the landed-price competitiveness of its products. Yet companies still need to meet the applicable rules of origin and destination-market standards before they can fully capture the benefits.

The expanding FTA network therefore gives Indian MSMEs a wider platform for internationalization, but export readiness will determine how effectively individual businesses turn these agreements into sustained overseas sales.