India's Small and Medium Enterprises Export Goods Around the World

Decent Essays

1. Introduction
Explanation and definition of SME´s
In India, Micro, Small and Medium Enterprises (MSMEs), contribution to GDP exceeds 17% and over 40% to industrial production. MSMEs’ share of total exports is 40% and a large share of additional exports indirectly, through third parties, trading houses, etc. Traditionally, export sectors in which MSMEs operate in India have been Textiles and Garments, Leather products, Gems and jewelry and Handicrafts. MSMEs’ also have a large share of market in industrial goods segments like Electricals, Electronics, machine parts, plastics, etc.

Risks for SME´s:

1. Financial risk

With increasing Labour costs, fuel costs and an intense competition in a global economy, the companies have to deal with …show more content…

An SME must ensure that a diligent credit assessment is carried out to find out the ability to make payments before giving credit to a potential customer.
SMEs can also use the credit ratings and business information that is readily available from sources such as the Credit Bureau. Even after a potential business partner has been assessed as credit worthy, SMEs should continue the diligence to either impose or monitor credit limits to limit and proactively manage their credit exposure.
In this project, we deal with ways in which currency exchange risk can be mitigated by SMEs in India.

2. Currency exchange risk:
Exchange rate risk is faced by businesses and investors due to change in exchange rates. An exporter is likely to experience shrinking sales, gross margins or both when domestic currency appreciates or foreign currency depreciated. The impact of fluctuation in exchange rates has significant impact on SMEs. In general, when the domestic currency appreciates, importers benefit and exporters are adversely impacted and vice versa. However, the impact varies from sector to sector. Furthermore, the ability of different sectors to withstand the impact is not the same. For instance, the IT sector having higher margins than the handicrafts sector, can relatively withstand the adverse impact of the appreciation of the rupee to a greater level.
1. Impact on exporters: Currency fluctuation impact exporters

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