Digitization of Indian MSMEs
Digitization and technology are the biggest giants of the 21st century. Every sector realizes the importance of digitalization and the benefits of adopting technology. The belief that there are practically zero respites without going digital is making its firm ground. And the ones who miss the train will either deteriorate or experience a bumpy ride filled with downs. Following the need, Indian MSMEs are also realizing the importance of digitalization. The article discusses the journey of Indian MSMEs towards digitization, inhibitions, and solutions to overcome the roadblocks. We will also discuss the significance of digital technology for MSMEs and threats associated.
India and its Journey with Digitization
After its Independence in 1947, the nation began its journey with technology. However, the real digital revolution came in the year 2015 with the flagship Digital India mission. And since then, we haven’t looked back. In 6 years, the Indian digital scenario witnessed a remarkable shift not only in terms of new payment ecosystems and digital marketplaces but also outlook and the cultural cognizance of the nation. The impact of digital India on the MSME sector is already evident, as the majority of MSMEs are incorporating digital solutions and increasing their online presence.
Importance of Digitization for Indian MSMEs
Micro, Small, and Medium Enterprises, also known as the pillars of the Indian economy, account for a 40% share of India’s GDP and employment. The sector plays a vital role in promoting inclusive development, generating jobs at low capital cost, bringing entrepreneurship to rural India, and decreasing regional imbalances. Thus the scope of MSME sector and their possible impact on India’s economic growth is recommendable. An astonishing impact of digital India on MSMEs was also seen. Despite the negative impacts of the Covid-19 pandemic on MSMEs, it has accelerated digital transformation in small scale industries.
Also Read: Prime Minister inaugurates MSME Technology Centre at Puducherry
Importance of Digitization for MSMEs
The pandemic was essentially a phase of digital evolution for the Indian MSME sector. During the lockdowns, the sector strengthened their arms to survive the tough times. As contactless services became the new norm, everyone right from the next-door vegetable seller to enterprises embraced digital transformation. The digital adoption meant the introduction of competitive services, the use of data analytics and machine learning, implementation of account intelligence, multichannel distribution, and automated procedures. As we realize the contribution and importance of the MSME sector for the Indian economy, the focus should also be on expanding the scope of the MSME sector by introducing digital MSMEs.
But the question remains, “Is digitization beneficial for MSMEs?” A short answer would be YES. According to a 2020 survey by Dun & Bradstreet, the MSMEs that adopted digital technology in their operations reported considerable cost reduction and improved positioning amidst the competition. Moreover, digital solutions can help our MSMEs to reach a wider consumer base, showcase their products, and boost their sales. An excellent example would be Meesho, India’s first e-commerce unicorn that enables small businesses to sell products online.
Well, that’s great, digital technology is the ultimate solution for Indian MSMEs crippling with performance-related issues. Then, where is the issue? The issue lies in the roadblocks inhibiting the small scale industries from embracing digital solutions. The list is endless ranging from limited budgets, legal complications, lack of know-how, primitive levels of knowledge, and many more.
What are the challenges of digital transformation in MSMEs?
Restricted growth budgets are making the shift to digitization and innovation sluggish.
- MSMEs’ aversion towards adopting cutting-edge technologies due to rapid evolution and change in trends.
- Lack of capital as well as expertise to constitute an in-house talent team to keep these units in line with new-age technologies.
- Little to no knowledge about data analytics, artificial intelligence, cloud, and system management, especially in rural MSMEs.
- Issues with storage, analysis, and handling of data for usage in making business decisions.
- Data, cloud, and system management, along with the training required to handle them, leave MSMEs uncertain.
- Lack of a well-versed talent pool to bring innovations in MSMEs. Without a tech-savvy and skilled employee base, innovation is impossible.
Indian MSMEs have primitive knowledge about technology, its adoption, and its applications. Expecting them to incorporate digital innovations in a blink is like asking a rider to fly a plane. Most MSMEs are completely new to the concepts of technological empowerment and technical literacy. And while we understand that ignorance is not always bliss, we believe that for MSME digitalization; the sector needs handholding to navigate them to the new-age innovations.
How to stimulate the adoption of digital technologies in the Indian MSMEs landscape?
The strategy for Indian MSMEs to incorporate technological up-gradation and bring digital transformation will include the following additions
1. Need for higher capital investment
The present levels of investment in spurring a digital revolution are insufficient when compared to the demands. Due to this, MSMEs have a poor technological infrastructure resulting in low-quality production. Moreover, research and development is a part and parcel of incorporating new technologies, but not much focus has been put on R&D yet. To sustain the results of digital technology for a longer time, MSMEs need to incorporate digital products that cut the operational costs and elevate the customers’ retention.
Thus, every digital investment that is driven by value will undoubtedly result in proportional returns.
2. Enhance digital literacy to operate new-age technologies
Indian MSMEs face a huge shortage of workers who are skilled with modern digital products. The high pedestal involving data analytics, automation, cloud computing, and data mining can only be accessed by sourcing relevant employees from the talent pools. To tap into the digital mine, the Government needs to frame courses and curriculums to educate The digital literacy drives including the applications and benefits of going digital can spur a new wave of digitization among Indian MSMEs.
3. Eliminate the hesitancy towards adopting digital solutions
Most Indian MSMEs hesitate while adopting technology-driven products as technological solutions seem alien to them. In the long-term, the lack of knowledge about the importance of digitalization and hesitancy ends up impacting their overall profitability. One concrete solution is spreading more awareness amongst MSME entrepreneurs as well as enterprises about the advantages of digitization and incorporation of innovative solutions through councils, trade bodies, and industry associations. Technological awareness will help MSMEs to understand the pathway to digital transformation and what benefits it holds for them.
4. Fuel Persistent Innovation and Up-gradation
Indian MSMEs need tailor-made solutions for fulfilling their operational needs. This is why technology adoption and innovation should go hand in hand. Innovation of existing solutions will give birth to better alternatives. However, a strong collaboration framework between technological institutions and MSME clusters is needed for fuelling innovation in the digital sphere. Moreover, Indian MSMEs need to make more use of freely available platforms such as social media for smooth digital transformation. Such digital tools do not need much financial investment and yield exceptional results in the form of sales leads and trust-building.
Cybersecurity to reduce data theft and digital fraud
As Indian MSMEs begin their journey with digital solutions for procurement, payments, inventory handling and management, the exposure to cyber threats will also rise. Besides, MSMEs are not well-equipped to track and protect their information systems against such attacks. Thus, more awareness coupled with reasonably priced cybersecurity options needs to be made available.
The importance of the MSME sector is immense. The Indian MSME sector has shown massive growth potential in the past few years. By combining the growth trajectory of MSMEs with an enhanced focus on leveraging technology, the MSME sector can do wonders. As our small scale industries upscale, they will need multi-channel distribution and high service needs. Moreover, the number of stakeholders and complexity will also rise as small enterprises welcome integrated operations, better quality goods, and automated systems. The adoption of new disruptive solutions such as Big data, the Internet of Things, Data Mining holds tremendous potential to enrich small enterprises and establish a seamless supply chain system. As MSMEs progress over their path of digital technologies, they will gain a competitive edge over their competitors.
By,
Prasad P. Patkar