With tailored state-specific export policies and enhanced trade routes, Punjab’s MSMEs are poised to overcome geographical disadvantages and harness lucrative global markets
In a decisive step to enhance industrial growth in Punjab, the NITI Aayog in partnership with the Punjab Government, has sought feedback from stakeholders to explore the potential of MSMEs as a driver of export growth. This initiative is essential for identifying and promptly resolving industry challenges. To meet the objective of boosting Punjab’s exports, MSMEs must be equipped with a comprehensive State Export Promotion Policy, linking them to sustainable growth and significant employment generation.
Exports are a fundamental pillar of a state’s development, and a strategic geographical location is vital for ensuring global competitiveness and job creation factors for robust economic growth. For instance, Haryana once a barren expanse, has emerged as one of the top five states for export value, thanks to its advantageous proximity to the National Capital Region (NCR). Currently, Haryana outpaces Punjab with five times more exports. Coastal states with access to seaports are a step ahead in engaging in international trade, while landlocked regions like Punjab endure higher trade costs and transit challenges.It is unacceptable that policymakers have not prioritised Punjab’s geographical disadvantages as a landlocked border state. The remoteness from seaports, inadequate connectivity, and frequent protests have created significant barriers to investment, resulting in a concerning decline in the industrial sector—a crisis that Punjab can no longer afford to ignore.The non-competitive environment for Punjab’s MSMEs, stemming from their distance from seaports, must be addressed head-on.
These challenges are surmountable, and it is crucial to focus on empowering Punjab’s vital MSMEs, which have the potential to become an “Export Engine” and deserve a fair platform to compete on equal terms.According to NITI Aayog’s latest Export Preparedness Index (EPI), Punjab ranks a disappointing 10th with a score of 58.95, while Haryana leads in 5th place with a score of 63.65. Notably, Gujarat has the highest number of districts among the top 25 in the country for export share (54 per cent), followed by Maharashtra with five districts, Haryana with one, and Punjab with none—only a meagre 2 per cent of the country’s exports.
Therefore, it is essential for Punjab to actively engage in export promotion initiatives for every potential MSME to dramatically increase its export figures.Why a State-Specific Policy Needed: The Foreign Trade Policy (FTP) for 2023-2028 has set an ambitious target of achieving $2 trillion in exports by 2030. However, with 766 districts across the country, it is unacceptable that only 43 cities designated as centres of export excellence receive crucial financial incentives for global market surveys, brand promotions, warehouse establishment, and zero customs duty on capital goods for export-oriented production.
This glaring disparity in the distribution of incentives underscores the urgent need for a more inclusive, state-specific policy. The current focus on a handful of ‘Towns of Export Excellence’ severely undermines the principles of ‘One District, One Product’ and ‘Sabka Saath, Sabka Vikas, Sabka Vishwas.’ Punjab must decisively shift towards ‘Industries of Export Excellence’ (IEE). This strategy will empower the identification and promotion of key sectors, such as textiles and apparel, bicycles, auto parts, tractors, engineering goods, hand and machine tools, sports goods, footwear, and leather products.
Furthermore, the Foreign Trade Policy is resolutely committed to enhancing decentralised export promotion. The introduction of districts as export hubs is a non-negotiable strategy within the MSMEs Export Promotion Policy. This initiative will systematically identify potential export products and services in every district, establishing institutional mechanisms for their promotion—a critical step toward realising the policy’s objectives. Every district in Punjab possesses significant untapped potential.
It is essential to identify additional districts for bolstering export operations, aligning with the imperative ‘Vocal for Local’ and ‘Make in India’ initiatives. India’s vision of transforming each district into an export hub demands the active engagement of MSMEs from all districts. The time for action is now.MSMEs Export Potential: Punjab boasts an impressive 14.65 lakh MSMEs, which are the backbone of the state’s industrial growth and are primed for global expansion.
These MSMEs are powerful hubs, excelling in industries such as textiles and apparel, bicycles, hosiery, tractors, automobile components, hand tools, machine tools, sports goods, engineering goods, footwear, and leather goods. They constitute a staggering 99.7 per cent of all MSMEs in the region, employing 65 per cent of the industrial workforce and generating 78 per cent of the state’s total industrial output. These industrial clusters possess immense potential and can be fostered further.Ludhiana stands as a powerhouse, ranking first(Rs 20,140 Crore export business) among the top ten exporting districts with an export business valued at Rs 55,844 Crore for 2023-24. It leads the nation by producing 92 per cent of India’s bicycle parts and 75 per cent of all bicycles, commanding an 80 per cent share in bicycle exports from India.
While India currently lags behind China in bicycle exports, we have a clear and compelling opportunity to elevate our global export targets by at least 10 per cent over the next two to three years, particularly in untapped markets in the US, Europe, and Africa.As the foremost producer of blended yarn and hosiery, Ludhiana holds its ground as the second-largest producer of polyester silk, fibre, and cotton yarn. It dominates woollen knitwear (95 per cent) and hosiery (65 per cent) exports, showcasing unparalleled strength in the global market. While China captures a commanding 37 per cent share in textiles apparel and hosiery, India needs to aggressively increase its mere 5% share in the worldwide market. The opportunity for growth is vast, particularly in lucrative export markets such as the USA, UAE, UK, Germany, France, and Australia.
In the farm equipment sector, Punjab is a force to be reckoned with, hosting one-third of the total original equipment manufacturers (OEMs) and standing as the leading tractor manufacturer. With a commanding 34.3 per cent share in exports, Sonalika ITL stands as the largest tractor exporter(Rs 3000 Cr) in 2023-24. Despite India’s current 2.2 per cent share in the global market, the potential for over 2 lakh tractors to be exported in the next 2-3 years to burgeoning markets such as Brazil, Argentina, Turkey, SAARC, and African nations is undeniable. Jalandhar dominates the sports goods sector, producing 45 per cent of the nation’s total and contributing to 75 per cent of the country’s sports goods exports. While China currently leads with a 42.2 per cent share, India’s scant 0.56 per cent share of global exports highlights the tremendous untapped potential for growth. The time is ripe for Punjab to seize lucrative opportunities in markets like the USA, UK, Brazil, Germany, Mexico, South Africa, Colombia, and Argentina, and make a formidable mark on the global stage.The Way Forward: To enhance the competitive edge of MSMEs in foreign trade, it’s crucial to allow the flow of bilateral trade from Punjab through the Wagah Border of Pakistan to Middle Eastern countries, CIS nations, Europe, and the US. Establishing a Directorate of Exports in the state is vital for aligning the state and central government’s export promotion policies.
One of the most pressing issues is the high borrowing cost of 10-12 per cent. It is essential to introduce interest subvention to create a level playing field for MSMEs, especially when compared to leading global players like China (3.1 per cent), Vietnam (4.5 per cent), Malaysia (3 per cent), and Thailand (3 per cent).Competitive and efficient logistics are foundational for export growth. Therefore, policy-backed support for state-owned wagons in landlocked border states like Punjab is essential.
This will help alleviate the burden of over-freight and provide a more equitable environment for driving export growth.
The Author is Vice-Chairman of Sonalika ITL Group, Vice-Chairman of the Punjab Economic Policy and Planning Board, Chairman of ASSOCHAM Northern Region Development Council and President of Tractor and Mechanization Association(TMA); Views expressed are personal.
