New Delhi: Kaizen Institute recognizes the immense growth potential of India’s MSMEs and their pivotal role in propelling the country’s economy forward. Digital transformation is expected to play a vital role in achieving this. As India’s internet economy is poised to reach $1 trillion by 2030, the digital maturity of MSMEs and large enterprises and startups will be vital in achieving sustainable growth. However, the development of MSMEs could be improved by critical obstacles related to market access, operational efficiencies, and credit availability. With over 95 per cent of India’s MSMEs classified as micro-firms, often operating with limited resources and struggling to expand into new markets, it is imperative to address their challenges. MSMEs face lower operating margins compared to larger enterprises, hindering their ability to thrive.
Additionally, the lack of access to formal credit leaves MSMEs reliant on costly informal credit options. A report highlighted that 47 per cent of credit demanded for MSMEs could not be addressed as this is from enterprises that are not financially viable or prefer to borrow from informal sources. There is, however, a significant need to make financing available as only 14 per cent of Indian MSMEs have access to finance.
Despite these hurdles, digital tools enable MSMEs to enhance productivity and improve business management. Cost-effective software solutions cater to specific business functions, such as tax compliance and invoicing, while automation streamlines process like payment reporting platforms.
Digital channels also catalyze growth, unlocking domestic and international markets. B2C and B2B marketplaces provide wide-ranging access, and low-code/no-code platforms empower MSMEs to connect directly with end customers. There is certainly a promising future for MSMEs adopting digital technologies. Already, 6 million out of India’s 60 million MSMEs actively engage in online transactions domestically, while 64 per cent of MSMEs report increased sales through digital or e-commerce channels. Furthermore, the government’s online Government e-Marketplace (GeM) has facilitated $40 billion of goods and services procured from MSMEs.
Kaizen Institute believes that by partnering with the MSME sector through strategic guidance, it will help address challenges of market access, operational efficiencies and credit availability, and we can unlock the full potential of India’s MSME sector, thereby driving economic growth and propelling India’s internet economy towards its projected trillion-dollar milestone by 2030.
