A Lesson From ASEAN To The Indian MSMEs On Trade Tariffs

If we could have Operation Sindoor, why can’t we have Operation Exports?” That question, posed by Vinod Kumar, President of the India SME Forum, captures the urgency facing India’s micro, small, and medium enterprises (MSMEs) as they confront a survival crisis amid steep US tariffs.

The United States’ decision to impose tariffs of up to 50% on most Indian goods exports—ostensibly due to continued purchases of Russian oil—has exposed the fragility of India’s trade ecosystem. While large corporations may absorb the shock, MSMEs—including countless family-run units employing over 110 million people and contributing significantly to exports—are being pushed to the brink. According to the India SME Forum, which represents around 100,000 small businesses, US $30 billion worth of MSME exports and around 80,000 jobs are at risk. Key affected sectors include textiles, pharmaceuticals, engineering goods, electronics, and jewellery.

This is not a theoretical concern—it is a looming disaster.

Amid rising global instability, India must embed resilience into its trade architecture.

The government’s four-pillar strategy—diversifying trade partners, expanding the export basket, boosting domestic manufacturing, and reviewing trade imbalances—is a welcome framework. However, these are long-term goals. MSMEs require immediate, targeted relief.

The India SME Forum has laid out a clear roadmap: operationalise the long-delayed Global Market Intelligence Service (GMIS), establish MSME trade desks abroad, streamline access to concessional credit, and create emergency liquidity corridors. These are not radical ideas—they are overdue lifelines. The GMIS, proposed in 2021–22, was envisioned as a one-stop portal offering data on global demand, pricing, logistics, and shipping. It remains non-functional. Today, where market intelligence is power, many Indian MSMEs are flying blind.

Southeast Asia offers useful lessons. Despite lighter tariffs, it is mobilising for further shocks. India, facing a steeper climb, cannot afford to lag.

The Business Adaptation Grant, announced by Singapore’s Economic Resilience Taskforce, is set to launch by October 2025 and offers up to S $100,000 per company (approximately US $78,000), with higher support levels for small and micro enterprises.

Vietnam moved fast—drastically cutting tariffs on US goods. In July 2025, after intense negotiations, it secured a drop in US tariffs from 46% to 20% on most exports, and 40% on transshipments.

What stands out is what Vietnam did alongside negotiating: manufacturers improved product quality, shifted to Free Trade Agreement (FTA) markets, diversified supply chains to reduce US dependence, upgraded industries, attracted foreign investment, and pivoted to Europe and the Regional Comprehensive Economic Partnership (RCEP). This was not isolated—it was systemic.

The Thai government is also preparing a compensation package for affected firms, exporters, and farmers, says Wannaphong Durongkaveroj, Associate Professor of Economics at Ramkhamhaeng University, Bangkok. A key initiative is the “competitiveness enhancement fund” of 10 billion baht (US $308.3 million), repurposed from the Digital Wallet scheme, a consumer stimulus programme, to help absorb the impact of rising tariffs. While Thailand still lacks a comprehensive MSME strategy, the government is mobilising resources.

“Thailand should have a strategic response to the Trump tariff. It should vary by firm size and capacity. For medium-sized entrepreneurs, loans for restructuring their production process and finding new partners (or buyers outside the US) are crucial. The Bank of Thailand has a big role to play,” Durongkaveroj said in an emailed response. “However, for micro- and small-sized businesses, focusing on the domestic market might be a viable option. To do so, they have to stay competitive. As their profit margin is low, the government can step in to control production costs like wages, energy, and commodities… During COVID-19, The Bank of Thailand supported MSMEs with financial packages. The current government must work closely with the newly appointed governor to help support the future of MSMEs in response to Trump.”

India SME Forum's Vinod Kumar flags the "long-term ailments”, which can’t be shrugged off. “India’s big corporations,” he says, “have the resources to network across the world; they also dominate in official delegations. But small players cannot do this. We still do not have an official mechanism to promote MSMEs to the rest of the world.”

Despite India having 6.68 crore MSMEs, only 1.73 lakh are currently engaged in exports—largely due to limited awareness, lack of accessible market intelligence, and uncertainty about where and how to begin. Many MSMEs simply do not know which products have demand in which countries, what prices prevail, or how to navigate regulations and logistics.

To bridge this gap, the GMIS must be operationalised and integrated with a real-time Trade Intelligence Cell. MSMEs need verified buyer leads, competitor pricing dashboards, and instant alerts on tariff changes and standards in target markets. This data must be easily accessible.

Finance is another immediate need. The India SME Forum’s recommendations to the government include establishing an emergency liquidity corridor, modelled on the Emergency Credit Line Guarantee Scheme (ECLGS), a government-backed scheme to help MSMEs survive COVID disruptions. Pre-approved guarantees and concessional credit should reach tariff-hit clusters, with seven-day disbursal to verified firms to prevent shutdowns and layoffs.

A Rs 20,000 crore mission to boost exports has been announced. But announcements must translate into action.

India must take note, not blindly follow others. As Kumar told me, “These are stressful times for MSMEs. Cashflows could be affected in the short term. We need to diversify; we need an emergency liquidity corridor and credit. Millions of jobs are at stake. We are reactive. We need a Plan B and a Plan C—even in normal times.”

Patralekha Chatterjee is a writer and columnist who spends her time in South and Southeast Asia, and looks at modern-day connects between the two adjacent regions. X: @Patralekha2011 

Published on: Tuesday, August 26, 2025, 01:46 PM IST