Survey findings: Policymakers must heed what India’s small exporters are saying

Yet, underneath these resilient macro statistics lies a precarious micro reality for the country’s small and medium enterprises (SMEs) that power nearly 50% of its exports and are mostly family businesses.

We conducted a survey of 461 SME family and non-family business exporters across 14 cities over October-December to study trade confidence, not as a single measure, but as a balance between optimism and risk—capturing expectations, current constraints and the direction in which risks are evolving.

The findings reveal a striking paradox. The headline Trade Confidence Index (TCI) stands at a robust 74.3, signalling strong optimism about near-term export growth. Yet, the Net Trade Confidence Score (NTCS), which adjusts for risks, drops sharply to 56.4. This 17.9-point gap is the quantitative expression of what may be called a ‘confidence trap’: firms believe in their capabilities, but not in the stability of the environment in which they operate.

This divergence becomes clearer when read alongside official data. Sectors such as electronics and engineering continue to show export momentum, and policy interventions like the Resilience and Logistics Intervention for Export Facilitation (Relief) scheme aim to cushion geopolitical disruptions. The survey data aligns with this resilience: 66% of SMEs expect export sales to grow and 85% are confident of the domestic economy.

These are not speculative views—the average respondent has over 16 years of export experience and represents seasoned survivors who have navigated past shocks.

However, forward-looking risk indicators tell a different story. The Risk Momentum Index at 40.5 signals that conditions are not just difficult but deteriorating. Every major risk dimension—from tariffs and currency volatility to supply chain disruptions—is worsening. Geopolitical instability emerges as the most acute concern, not as an abstract threat but as an operational constraint affecting payments, logistics and margins. The report identifies three specific ‘crush points”’ that could derail the momentum:

First, the concentration trap. Over half of SME exporters depend on just one or two destination markets. In an era of fragmented trade blocs and sudden policy shocks, this creates systemic exposure. While firms are eyeing frontier markets in Africa and Latin America, 25.4% are so risk-averse that they plan no new market expansion at all over the next year.

Second, the invisible retreat. More than 52% of respondents are planning to scale back international exposure, either by pivoting towards domestic markets or reducing export intensity. This shift is not yet visible in our trade data, which captures realized exports rather than strategic intent. But it signals a potential erosion of India’s export base over time.

Third, the family fracture. In SME family businesses, external uncertainty is interacting with internal governance dynamics. The survey finds that intra-family disagreements over internationalization are rising faster than even macroeconomic risks. As geopolitical uncertainty increases, generational differences in risk appetite become sharper.

The tragedy of this confidence gap is that it is being widened by institutional rather than structural factors. While we celebrate the signing of mega-free trade agreements (FTAs), the reality on the ground is one of profound ignorance: 57.1% of SMEs do not use FTAs and 68.1% of them say this is because they don’t know deals exist. This is not a failure of policy design, but of policy transmission.

With over 62% of respondents citing aggressive tariff policies as a major threat, the reliance on a few markets becomes a death trap. Schemes like Relief are providing temporary oxygen, but do not solve the underlying structural asthma. Over 36% of firms report difficulty accessing export finance even as expectations of improvement remain high, highlighting a persistent disconnect between policy intent and firm-level experience.

India’s export resilience is being sustained by firms operating under increasing strain. SMEs are absorbing geopolitical shocks through operational adjustments, financial stress and strategic caution. But resilience is not an inexhaustible resource.

If current trends persist, the risk is not of an immediate collapse in exports, but of a gradual narrowing of our exporter base. Fewer firms may participate in global markets, with exports becoming more concentrated among larger players. This would reduce diversification, weaken supply chain integration and make the export ecosystem more vulnerable.

Policy must evolve from promoting exports to sustaining exporters, addressing the granular anxieties of the family firm. We need more than just fiscal incentives; we need a ‘geopolitical concierge’ for SMEs—one that provides market intelligence, guides them through FTA compliance, strengthens their access to trade finance and risk mitigation tools and helps bridge the generational divide within family boards.

Without these, the 17.9-point gap between optimism and reality will eventually close—not on account of risk reduction, but because confidence collapses under the weight of a fast-fragmenting world.

The author is professor, economics and executive director, Centre for Family Business & Entrepreneurship at Bhavan’s SPJIMR.