Impact of Unfair Trade Practices on Small and Medium Enterprises (SMEs) in India

Abstract

Unfair trade practices such as predatory pricing, dumping, I.P theft and misleading advertising affect India's Small and Medium Enterprises (SMEs) which generate 30% of GDP providing livelihood to 110 million. Such practices make for an uneven playing field, requiring SMEs to compete on cost, driving profit margins down by as much as 15–25%, and in highly vulnerable sectors such as textiles or pharmaceuticals, counterfeit goods can wipe out a quarter of revenues. A total of 78% of SMEs have encountered this kind of practice, but since the state judicial system floats on long delays of three to five years and high litigation costs (with only one third able to litigate), the vulnerability is aggravated. Formalization of 25 million MSMEs though government initiatives such as Udyam registration has not brought awareness to redressal mechanisms up to 35% below while leaving SMEs vulnerable to exploitation. This stifles innovation – with 50% fewer patents filed and a resulting cost of 1.2% of India’s annual GDP growth. But examples like in Maharashtra and Tamil Nadu, home to active trade monitoring cells, have dispute resolution twenty percent faster and a fifteen percent higher rate of SME survival, proving that robust enforcement works. By digitizing grievance portals (which bring down redressal time below 90 days), making mandatory trade audits for large firms, and selecting SMEs to benefit from IP protection cells, unfair practices could come down by 60% in five years and increase SME’s contribution to GDP by 2–3 percentage points. It highlights the demand for stronger regulatory frameworks, higher awareness among the states and reporting agencies, and more proactive government policies to protect SMEs, encourage fair competition, and promote the Atmanirbhar Bharat vision.