The commonwealth offers Indian SMEs the chance to grow exports

By Rashmi Banga

Goa is renowned for its beautiful beaches, gorgeous sunsets and thriving tourism industry. It’s also where Dr.Sangam Kurade runs his successful business. No, he isn’t the owner of some hotel on a beach front doing a booming trade. For more than twenty years, Dr Kurade has been producing high quality button mushrooms at his ‘multi-facility company’ on the two farms he owns and its 100,000 square feet of growing area. For some time now his firm, “Dr Kurade’s1”, has been eyeing the European market. But it hasn’t been able to compete with the big exporters, especially within the EU, like Germany and Poland. Language had also been a big stumbling block in his efforts to break into the EU market. Post-Brexit, though, Dr Kurade hopes to sell his mushrooms to the UK. The UK currently imports its mushrooms from the EU.

India’s relationship with the Commonwealth came into sharp focus after the UK decided to leave the EU and start work on its post-Brexit plans. While the UK has been showcasing the Commonwealth as an alternative to the EU, India sees no real reason to realign its trading relationships with the Commonwealth. However, it’s interesting to note that in 2015, the Commonwealth’s share in India’s global trade was a staggering 45 per cent, up from 40 percent in 2013. Further, India’s exports to the Commonwealth declined from US$ 71 billion in 2013 to around US$ 56 billion in 2015. But its imports surpassed its exports, amounting to around US$ 62 billion in the same year. This shifting balance of trade and growing importance of the Commonwealth in India’s global trade raises a relevant question: is it now time for India to explore the trade potential within the Commonwealth?

What the Commonwealth has to offer is its unique group of 52 countries of diverse sizes, spread across the different continents of Africa, Asia, the Americas, Europe and the Pacific. It includes developed countries like Australia, Canada, New Zealand, Singapore and the UK. Some states are big and developing, like India, Ghana, Kenya, Nigeria and South Africa. In contrast, the Commonwealth also has some of the least developed countries and small island states, such as Bangladesh, Sri Lanka, Tanzania, Uganda, Malawi, Belize, Trinidad and Tobago, St Kitts and Nevis. The 52 nations also include some of the fastest growing in the world.

In sharp contrast to the EU, growth in the Commonwealth has accelerated over the past two decades, recording 5 per cent in 2015. Compare this to less than 2 percent growth in the EU. This has had the effect of increasing the share of the Commonwealth when it comes to global gross domestic product (GDP), and in 2005 it overtook the EU. The growth in the Commonwealth is also supported by strong favourable demographics.

In the past India has ignored the growing strength of the Commonwealth and has concentrated on only few member states. Five of these account for around 60 per cent of India’s exports namely, the UK, Singapore, Bangladesh, Sri Lanka and Malaysia. In terms of its imports, five countries account for around 70 per cent of India’s imports. These are Nigeria, Malaysia, Australia, Singapore and South Africa.

For a small and medium enterprise (SME) in India, Commonwealth countries can provide a huge potential for trade and investment. A SME is often lost and unable to compete in export markets when it enters big countries or regions, like the EU, US or even East Asia. Many small island states, like Barbados, Belize, Seychelles, Jamaica, Lesotho, Trinidad and Tobago, St Kitts and Nevis, Cameroon, are keen to do business with India’s SMEs. So are the big developing countries like Kenya, Nigeria and Ghana.

The point is that many Commonwealth countries are heavily dependent on India for their food, clothes, footwear and technology. So Indian SMEs have the potential to negotiate better trade deals when compared to their existing suppliers. One of the advantages that the Commonwealth provides to its member states is common language, common rule of law and familiar institutions. This gives a competitive advantage, a ‘Commonwealth advantage’, to the SMEs of around 10 per cent in terms of lowering their transaction costs2. However, the big challenge facing them is having access to reliable trade and investment partners in these countries.

In view of this untapped trade potential, India’s Department of Commerce, the Indian government along with the three big Indian industry associations, CII, FICCI and FISME, have launched the India-Commonwealth SME Association (Iwww.icsa.net.in). It will provide a sustainable platform for the Indian SMEs to meet and do business with reliable partners in other Commonwealth countries. The Association is hosting its ‘First India-Commonwealth SME Trade Summit’ in New Delhi on 30 and 31 May 2017, where over 300 Indian SMEs will meet more than 150 Commonwealth businesses to form trade and investment partnerships, share their innovations, sell their low cost technologies and boost their competitiveness by forming global value chains.

It’s time to think big in order to help the Indian SMEs grow and expand their exports. Many wannabe exporters, like Dr Kurade, will be able to find their trade and investment partners within the Commonwealth at the summit, language being no barrier to their talks.