The Micro Small and Medium Enterprises (MSMEs) sector is a major contributor to the socio-economic development of the country. In India, the sector has gained significant importance due to its contribution to the Gross Domestic Product (GDP) of the country and its exports.
While the world is still recovering from the pandemic, it has showcased the potential of digitisation and has acted as a catalyst in accelerating the adoption of digital services across India. Case in point, according to a study from Nielsen, there has been a stellar 45 per cent growth in active internet users across rural India.
While digital was on the rise, several sectors were hit by the strict curbs and new ways of societal life during the pandemic. One of the sectors that underwent several disruptions across markets and supply chains is the MSMEs.
The MSME sector contributes to more than 29 per cent of India’s GDP and is a major contributor to the country’s employment. After the 2 year-long slump period, the sector has bounced back and, given the upsurge in digital adoption across the country, is also on the verge of a digital transformation.
The rise of the digital economy with the emergence of new-age startups offering customised solutions is now proving to be a game-changer for the MSME sector.
Another key factor is the support offered by the government with many proactive measures taken forward in the last 2 years, including an economic relief package of around Rs. 30 lakh crores.
In the initial days of the pandemic, the MSME ministry launched Creation and Harmonious Application of Modern Processes for Increasing the Output and National Strength (CHAMPIONS) portal, a single-window platform that was Information and Communication Technology (ICT) enabled, and provided guidance, hand-holding and dispute resolution.
The portal was aimed at helping the smaller players in the segment to chart faster growth, by helping them with finance, raw materials, labour, permissions, etc. Similarly, the dearth of skilled manpower has stood in the way of the growth of the MSME sector.
The government is addressing this challenge by connecting job aspirants with MSMEs through Udyam, National Career Service, e-Shram and ASEEM portals.
Twenty per cent of the MSME sector is located in the rural parts of India. A major challenge faced by MSMEs that was based especially in the hinterlands, was the lack of access to formal credit, due to the lack of adequate documents and collaterals required for traditional lending.
The partnership between rural fintechs and traditional banking institutions can pave the way for the MSME sector and ensure that credit access is available to the intended beneficiaries.
This collaboration can benefit the country’s goal of financial inclusion and create an Atmanirbhar Bharat by bridging the credit gap and bringing micro and small firms even in rural India, within the ambit of formal credit.
Another major potential driver for the growth of MSMEs in India would be the introduction of global technology and best practices. In order to further scale up the growth of the MSME sector, it is crucial to map the technology practices followed by the MSME sector in international markets and introduce the initiatives that can work for Indian MSMEs.
We must focus on incorporating new-age automation and data exchange in manufacturing technologies including a combination of cyber-physical systems, the internet of things (IOT) and cloud computing.
India’s booming e-commerce has been another significant driver for MSMEs and should continue to remain so in the years to come. Projected to reach USD 80 billion by 2021 and USD 300 billion by 2030, for MSMEs, the e-commerce sector can lead to economic stability, growth and security.
It is a channel that allows even the smallest MSMEs to showcase their products across geographies, not just in India, but in any part of the world without having to shell out on expansion or changing locations.
With the adoption of this model, MSMEs also stand to gain transformational insights into their sales and marketing efforts, with the tremendous amount of data that can be generated on these e-commerce platforms.
Additionally, strategic partnerships between the government, regulatory bodies and fintech players can help in addressing the complex and unique challenges faced by the MSME sector.
One such initiative is to set up MSME training programs that will help in bridging the existing gap between the legacy firms and MSMEs.
With a significant number of MSMEs in India, the results may not reflect immediately, however it will establish a robust foundation that will lead to the exponential growth of the sector in the coming years.