Navigating Logistics Hurdles: Unlocking Global Competitiveness for India’s SME Exporters
Author: Mr. K. Unnikrishnan, Joint Director General, Federation of Indian Exporters Organisation (FIEO)
India’s SME exporters form the backbone of the country’s trade engine, contributing nearly 45% to merchandise exports and powering diverse sectors ranging from textiles to engineering goods. As global demand shifts and supply chains evolve, their ability to deliver products reliably and competitively to international markets hinges significantly on logistics efficiency. While recent policy initiatives have addressed several bottlenecks, pressing challenges in the export logistics ecosystem continue to shape the competitiveness of SMEs.
Freight Costs and Rate Volatility: A Pressing Concern
The pandemic years and subsequent geopolitical disruptions have exposed SME exporters to unprecedented freight rate volatility. Even as rates stabilize from their pandemic-era highs, exporters remain vulnerable to sharp spikes triggered by global conflicts or trade route disruptions, such as the ongoing Red Sea crisis. While larger firms often hedge through long-term contracts, SMEs reliant on spot bookings face compressed margins and, at times, are forced to absorb cost escalations rather than risk losing buyers.
Government interventions, including the launch of PM Gati Shakti and National Logistics Policy, aim to lower logistics costs to single-digit levels of GDP contribution. Yet, the benefits of these macro-level initiatives will take time to cascade fully to SMEs, underscoring the need for targeted support like freight subsidies or export-specific logistics corridors.
Infrastructure and First-Mile Connectivity
Port-led growth has been a central focus of India’s trade strategy, with modernized terminals and digitized port operations, cooling of mother vessels etc started help in reducing turnaround times. However, first-mile connectivity from SME manufacturing clusters to ports remains a weak link. Poor road quality in hinterland areas, inadequate multimodal linkages and congestion at key transport nodes add to transit delays and demurrage costs.
Efforts like dedicated freight corridors and multimodal logistics parks offer hope, but SMEs would benefit from faster integration of these facilities with industrial clusters. For exporters, access to Grade-A warehousing and better cold chain infrastructure remains a key differentiator in meeting stringent international standards, especially in high-value sectors like pharmaceuticals and perishables.
Compliance Complexity and Digital Readiness
Customs clearance and export documentation have improved significantly with platforms like ICEGATE and SWIFT, yet procedural complexity persists for SMEs with limited in-house expertise. Frequent regulatory changes, coupled with the need to comply with importing-country standards, strain smaller enterprises who rely heavily on customs brokers and freight forwarders.
The government’s push toward paperless trade and the Unified Logistics Interface Platform (ULIP) is a step in the right direction. Wider adoption of these systems, coupled with simplified guidance for SMEs, can reduce compliance costs and improve predictability.
Working Capital Pressures
SME exporters operate on thin cash cycles, often contending with delayed payments from overseas buyers while facing upfront logistics costs, ranging from freight bookings to port charges. The payment cycles for MSME exporters continuously increasing due to geopolitical situation and cheaper working capital availability compared to our competing countries is need of the hour. However, irrespective of the promises of rolling out alternative scheme for interest subvention, nothing has been announced so far by the Government. Although efforts to expedite duty drawback and GST refunds have eased some liquidity stress, greater alignment between logistics payment cycles and export finance frameworks with competitive rates would strengthen SMEs’ ability to meet commitments without overleveraging.
Digital Transformation and Real-Time Visibility
Global buyers increasingly expect real-time shipment tracking and predictive ETAs, benchmarks set by large multinational suppliers. Yet, most SME exporters continue to depend on traditional freight channels and fragmented digital tools, leading to limited visibility in transit and weakened buyer confidence.
Encouraging SMEs to adopt cost-effective digital freight and tracking solutions, potentially supported through incentives or partnerships would help bridge this gap and position Indian SMEs more competitively in global supply chains.
Carbon Footprint initiatives of logistics sector to address growing demands of export markets
There is strong pressure from export markets on MSME exporters to adopt green logistics strategies. Underutilised rail freight (25%) viz China (70%) should be looked into more closely by extending 1st and last mile connectivity to major manufacturing cluster can help in better utilisation of rail transport. Other green transmission cost like adoption of EV in logistics is higher in cost which MSMs find forbidding. Due to lack of insufficient handling facilities, inland waterways facilities in many potential places still a non- starter. For boosting global trade competitiveness, India should adopt more effective low carbon logistics strategies which should also cost effective and help in adding efficiency.
Charting the Road Ahead
India’s policy vision for logistics, through Gati Shakti, PM MITRA parks and the National Logistics Policy is rightly aligned with the goal of reducing logistics costs and improving ease of doing business. For SMEs, the next step lies in cluster-focused interventions, integrated trade facilitation hubs, and broader access to digital tools that can provide transparency and reliability in export operations. Technology driven reforms and upgrading infrastructure can reduce costs, cut delays and enhance reliability which can transform MSMEs scale exports, integrate into value chains and drive economic growth.
FIEO remains committed to working closely with policymakers, industry stakeholders and exporters themselves to translate these policy frameworks into tangible gains at the ground level, enabling SMEs not only to meet global standards but to shape them.
With India poised to become a $2 trillion export economy by 2030, logistics efficiency is no longer a supporting function, it is the fulcrum of competitiveness. For SME exporters, unlocking this efficiency will be the key to turning opportunity into sustained global success.
Disclaimer: Views expressed in the article are the personal opinions of the author.
