Examining the Role of India's Micro, Small, and Medium Enterprise Sector in Exports and Foreign Exchange Reserves

Abstract

Across the globe, MSMEs have come to be seen as a key driver of economic expansion. When it comes to boosting inclusive growth and making significant contributions to economic development, the MSMEs sector plays a crucial role. The focus of this study is on the role that micro, small, and medium-sized enterprises (MSMEs) play in the Indian economy. This research tries to examine the link between exports, foreign exchange reserves, and the MSMEs industry. To establish the association, the augmented Dickey-Fuller Test and Philip Perron tests were employed to assess the amount of stationarity of the data, additionally, Johanson's cointegration technique and Granger causality tests were utilized to determine the purpose of the study. The timeframe scope of the study encompasses the period from 1992-93 to 2021-22. One of the primary findings of this study is the presence of a unidirectional association between micro, small, and medium enterprises (MSMEs) and exports, as proven by a causality test. Therefore, the conclusions drawn from this study suggest the need to prioritize the implementation of initiatives aimed at enhancing the condition of MSMEs and establishing a conducive environment for their long-term viability. This is crucial in order to bolster India's export capabilities and foreign exchange reserves.