Why HS-Classified MSME Data Can Unlock the Next Textile Export Push

V K Batra

V K Batra And Associates

The Indian textile and apparel industry remains one of the country’s most important export value chains. Official releases from the Ministry of Textiles noted that India was the world’s sixth-largest exporter of textiles and apparel in 2024, with the sector contributing 8.63% of India’s total exports and about 4.1% of global textile and apparel trade. Later official communication added that textile and apparel exports, including handicrafts, reached about USD 37.7 billion in 2024–25.

This export strength is sustained through a broad textile value chain that includes large, medium, small and micro enterprises operating under the framework of the MSMED Act, 2006 and its subsequent notifications and orders. Yet recent policy work has highlighted a structural imbalance: medium enterprises, though only a very small fraction of total MSMEs, contribute nearly 40% of MSME exports. That is a major achievement for medium enterprises, but it also raises an important question: why is the much larger base of micro and small enterprises not contributing proportionately to export growth?

The current registration data makes the scale of this untapped opportunity very clear. The official MSME dashboard shows that registered enterprises have expanded dramatically and now include around 7,80,84,338 micro enterprises, 4,90,546 small enterprises, and 36,991 medium enterprises. In other words, micro enterprises dominate the industrial landscape numerically, while medium enterprises dominate export contribution far more than their numbers would suggest.

This is especially important in the textile sector because India’s major clusters have already shown that competitiveness exists at the ground level. Panipat in home textiles, Tiruppur in knitwear, Karur in made-ups and home furnishing products, and Ludhiana in woollens and knitwear all demonstrate that micro and small enterprises can produce at scale, respond to demanding markets, and sustain value-chain linkages over long periods. The issue is not entrepreneurial absence. The issue is inadequate product-wise visibility and targeted handholding.

At present, the available public data does not clearly show how different MSME segments contribute to exports under specific HS product categories. This is the key policy gap. Export promotion, customs classification, and DGFT trade regulation operate through ITC(HS) product classification, while GST uses HSN-based product coding. Unless MSME registration data is translated into those same product categories, policy diagnosis remains incomplete and resource allocation remains broad rather than precise.

This means India still cannot easily answer basic but critical questions. Which textile product baskets are dominated by micro enterprises? Which clusters have strong domestic production but weak export conversion? Which product lines require testing, design support, logistics support, or market access intervention? Which schemes should be directed to which part of the value chain? In the absence of HS-classified MSME data, these questions remain difficult to answer with clarity.

For this reason, classifying MSME registrations into HS-linked product categories is not merely desirable; it is essential. Once the data is so classified, it can be shared with the Ministry of Textiles, the Ministry of Commerce and Industry, and the Ministry of Finance for coordinated policy action. Resource allocation can then be based not only on general MSME promotion, but on measurable export contribution, domestic production capacity, employment intensity, and import-substitution potential.

Such classification would also greatly strengthen the work of Export Promotion Councils, because textile export promotion is already highly specialised. For example, product lines in home textiles and furnishings connect differently with TEXPROCIL, the Handloom Export Promotion Council, the Carpet Export Promotion Council, and the Apparel Export Promotion Council, depending on the exact product category. International fairs such as Heimtextil and specialised flooring, furnishings and furniture fairs are also organised around specific product baskets. If MSME registration data is similarly classified, the export promotion policy will become sharper and more actionable.

The same product-and-segment lens should also guide scheme review. Financial support mechanisms such as collateral-free lending through CGTMSE, RBI priority sector lending directions, and SIDBI support for machinery, infrastructure and enterprise development are all valuable policy instruments. But their true impact should be assessed segment-wise and product-wise. A scheme can be successful in aggregate and still fail to reach the micro units that need it the most.

That is why a stronger financing architecture is required. A debt-only framework is not enough for large-scale micro-enterprise graduation. India needs an integrated Debt + Subsidy + Equity approach. SEBI, SIDBI and the Credit Guarantee Fund Trust of India can play an important catalytic role by creating stronger pathways for micro and small enterprises to access equity support through Alternative Investment Funds, angel investors, venture capital structures, and eventually specialised IPO and private-equity channels appropriate to enterprise size and maturity. Such support would help viable micro enterprises upgrade into small enterprises more quickly.

This is not only an export issue; it is also an employment and development issue. Micro enterprises are by far the largest segment numerically and remain among the most employment-intensive parts of India’s industrial base. Better classification and better policy execution would therefore improve not only exports, but also domestic production, GDP contribution, and poverty reduction outcomes.

Finally, no serious review can ignore delayed payments and grievance redressal under Sections 15 to 21 of the MSMED Act. For micro and small enterprises, delayed payments are not simply a legal inconvenience. They weaken working capital, reduce technology-upgradation capacity, increase financial stress, and limit export readiness. If India wants its micro and small textile enterprises to contribute more effectively to export promotion and import substitution—including in competition with imports from China—then delayed payment resolution, compliance support and product-specific policy targeting must become central concerns.

India has already achieved the first milestone by formalising MSMEs at scale. The next milestone is to classify them intelligently, support them selectively, and review outcomes periodically. If that is done seriously, micro and small enterprises can become the next major drivers of India’s textile export growth while also strengthening employment generation and domestic manufacturing.

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