A RISK-RESILIENT SUPPLY CHAIN FRAMEWORK FOR INDIAN MSMES FACING FOREX EXPOSURE

Abstract

The research project addresses a significant challenge of foreign currency (foreign exchange) risk faced by Indian micro, small and medium enterprises engaged in international trade. MSMES contributed 40% of India's exports, which is still highly unsafe for ups and downs in currency, the study develops a practical structure to increase foreign exchange flexibility in three major areas: textiles, pharmaceuticals and electronics. Conclusions suggest that unexpected currency movements severely affect their competition in global markets, an average annual margin of 9.2% for textile exporters, 11.5% for drug firms and 9.7% for electronics manufacturers. The study identifies three primary obstacles for effective foreign exchange management: (1) High collateral requirements for traditional hedging devices (minimum), (2) 72% MSMES lack of awareness about fintech solutions, and (3) complex documentations for government subsidy schemes. Through analysis of secondary data from RBI, Exim banks, and industry associations, in association with the case study of representative firms, research shows how a combination of technical, operations and policy interventions may reduce these challenges. The proposed tripartite structure integrates the supply chain adjustment and simplified policy measures such as fintech-operated micro-hugging platforms, diverse sourcing. The suggestion integrate three ways that involve AI hedging tools with lesser costs than traditional banking products along with supplier transitions toward domestic currency suppliers and creating specific forex clinics for MSMEs via RBI initiative. The overall implementation timeline extends for one year with initial workshops for risk estimates followed by complete policy implementation in subsequent months. The framework demonstrates its capacity to cut down forex-related losses by 45-51% and speed up working capital cycles by 18-22 days during actual market evaluations. The research supports academic development through its work which connects abstract forex risk models to the practical business requirements of MSMEs. This research provides concrete policy guidelines to policy makers for revising assistance frameworks and serves as a sequential implementation tool for currency risk preparedness development among MSMEs.