India’s 30% of GDP-contributing Micro, Small, and Medium Enterprises (MSMEs) that engage over 111 million workers are being revolutionized by a digital revolution that is driving record growth.
From cloud computing to e-commerce, digital transformation is helping MSMEs automate processes, reach global markets, and compete with larger players.
As India aims for a $5 trillion economy, the question is whether digitalization will continue at the same velocity for MSMEs or whether cost and skills shortage will be the dampener.
Digital transformation is the adoption of technology such as artificial intelligence (AI), the Internet of Things (IoT), and digital payment systems to make companies more efficient.
For MSMEs, which account for 45% of India’s manufacturing and 40% of exports, the above technologies are game-changing. In 2024, a report by the Confederation of Indian Industry (CII) puts digital adoption in the position to boost the productivity of MSMEs by 20-25%, adding $150 billion to GDP by 2030.
The Unified Payments Interface (UPI), which processes 72% of MSME transactions, has simplified payments, while Amazon and Flipkart have enabled small business sellers to reach customers across the country.
Government policies are accelerating this shift. The Raising and Accelerating MSME Performance (RAMP) initiative, with Rs. 713 crore investment in nine states, promotes digital technologies like enterprise resource planning (ERP) software and e-commerce integration.
Ministry of MSME’s Digital Saksham portal offers training in cybersecurity and digital marketing, impacting over 500,000 MSMEs since 2022.
The Open Network for Digital Commerce (ONDC) has onboarded 300,000 small enterprises and enables them to sell online without relying on private marketplaces. In Tamil Nadu, Coimbatore-based textile MSMEs have doubled their online sales using ONDC, according to a 2024 MSME Ministry report.
Adoption of technology is paying dividends. Cloud-based tools like Zoho and Tally allow MSMEs to do accounting and inventory at a cost savings of as much as 30%.
AI-driven analytics, adopted by firms like WareIQ, optimize supply chains for small stores by reducing delivery times by 40%. IoT-enabled equipment in clusters like Gujarat’s ceramics has increased output efficiency by 15%, a 2023 report discovered.
Digital trade and e-marketing are levelling the playing field. Online platforms such as IndiaMART are connecting MSMEs with international buyers, boosting orders by 60% for 150 million of its registered businesses in 2024.
Online payment platforms, backed by UPI and BharatQR, are weaning people off cash, facilitating faster transactions for rural MSMEs. Women-owned businesses, which comprise 20% of MSMEs, are particularly supported, with initiatives such as the Women Entrepreneurship Platform (WEP) providing digital training to 50,000 women since 2023.
Although these gains have been achieved, there remain obstacles. High upfront investments in digital technologies—Rs. 1 lakh to Rs. 10 lakh for ERP solutions—test MSME budgets to the limit, with only 15% enjoying access to low-cost credit, a 2024 SIDBI report estimates.
Talent shortages are a big obstacle; only 5% of MSME staff are familiar with cutting-edge digital technologies, Nasscom discovers.
Cybersecurity is a problem as well, with 43% of MSMEs experiencing data breaches in 2024, a Deloitte survey discovers, highlighting the requirement for robust digital infrastructure. Regional disparities persist too, with MSMEs in Tier 2 cities like Patna lagging behind Bengaluru or Mumbai due to low internet penetration and training.
Infrastructure bottlenecks also increase adoption complexity. Although 5G rollout is facilitating connectivity, only 40% of rural MSMEs enjoy reliable high-speed internet, according to a 2024 TRAI report. @TechLogisticsIN’s tweet remembered that erratic power supply limits cloud-based businesses in Uttar Pradesh, impacting small producers.
Regulatory complexities like GST compliance burden MSMEs with limited resources, even as digital solutions like GSTN portals.
In order to cross these barriers, specialists advise targeted interventions. Digital adoption incentives, like in the Digital MSME Scheme, can help save costs. Scaling up Skill India training and partnerships with tech firms like Google can bridge skill gaps.
Building cybersecurity infrastructure and accelerating rural internet penetration are both critical for inclusive growth. Public-private partnerships, like Maharashtra’s MSME clusters, can provide shared digital infrastructure at reduced cost for small industry.
Digitalization is propelling MSMEs to new heights, enabling them to grow at a faster rate and compete globally. With the government’s support and increasing technology adoption, India’s 63 million MSMEs are poised to drive economic growth.
But to ensure that all MSMEs, and not just those in urban areas, are able to benefit from it, cost, skill, and infrastructure challenges must be addressed. As India charges towards Viksit Bharat@2047, digitalization could be the MSME secret to success—if the ecosystem is able to keep pace with the vision.