MSMEs to embrace Digitalisation to stay ahead of competition

India's micro-, small- and medium-sized enterprise sector is a vital contributor to the country's growth story. Today, more than six crore MSMEs contribute 8 percent to India's GDP, 6.11 percent to its total manufacturing output, and 24.6 percent in services. The MSME sector could help enable reduction of regulatory cholesterol and make it globally competitive.

We recognise MSME as the backbone of the Indian economy. Numbering between 45 to 50 million, they provide employment to 150-180 million people, contributing to 30% of GDP and 40% of exports. Despite enormous potential, they face challenges impeding productivity and efficiency. With Covid-19, however, they received a crippling blow. According to a survey by AIMO, about 35% of MSMEs and 37% of the self-employed people have already shut their businesses or are on the brink.

A report says, the businesses that downgraded during the pandemic are due to lack of IT skills and scientific inventory control, digital marketing, social media usage, etc, apart from the proper financial support. After Covid-19, lockdowns, cash crunch, migration of workers, dwindling demand and disruptions across supply lines have exacerbated problems.

Now the question arises how these MSMEs could become Atmanirbhar? Until or unless they do certain structural modernisation inside their organisation by upgrading skillsets with the available digital tools it is quite difficult to win the race and sustain. A study reveals that over 50 percent of digitally-empowered MSMEs have improved their profits, operational efficiencies, as well as customer engagement. On the other hand, only 5 percent embraced complete digitalisation, even though over 60 percent were digitally enabled.

Technology adoption has always been a major challenge for the MSME sector due to lack of capital and poor understanding of digital tools. New-age digital techniques are going to help MSMEs raise finances smoothly whereas the Fin-techs conduct loan evaluation quicker with documents digitally uploaded by loan-seekers by making the applications customer-friendly, not needing long paper-based forms with numerous documents. An expert says, if the entire Indian e-commerce ecosystem links to MSMEs, then that would bring a revolution among the global players like Amazon, Flipkart, and now, Reliance-Jio supported by tech-behemoths Facebook and Google.

Why is digital asset security crucial for MSMEs? Small businesses are well-acquainted with operational and financial risks, but their ignorance towards digital or cyber risks has emerged as a cause of worry. According to a report by the cybersecurity company Kaspersky,

•48% of small businesses witnessed data breaches in 2019, up from 46% in 2018.

•36% reported the incidents in 2019, again up from 30% in 2018.

•47% claimed that they were struggling to distinguish between generic and advanced cyber-attacks.

The B2B market for finished goods in India is estimated at around 650 billion dollars and is rapidly growing. The role and potential of Indian MSMEs along with the need to improve their efficiency, productivity and quality needs to be viewed in the context of a globally competitive landscape of their peers in Vietnam, Thailand, Myanmar, etc, when some of the firms from China might be exploring to relocate elsewhere, and when the architecture of globally interconnected supply chain may also be poised to undergo a transformation.