Unlocking MSME potential- Digital tools are crucial for expanding their reach and unleashing growth

Source: The post is based on the article “Unlocking MSME potential- Digital tools are crucial for expanding their reach and unleashing growth” published in “Business standard” on 22nd September 2023.

Syllabus: GS3- Economy- Industries (MSMEs) & GS3- Science and Technology- developments and their applications and effects in everyday life.

News: The article discusses the challenges faced by small and medium enterprises (MSMEs) in India, including access to finance and technology. It highlights a study showing that using e-commerce platforms can help these businesses reach a wider customer base and improve sales, especially those that are more productive and export-oriented. However, there is a need to address inequities and barriers preventing some MSMEs from adopting such digital platforms.

Why do MSMEs join e-commerce platforms?

Broader Customer Base: MSMEs get access to a wider range of customers, extending their market reach beyond geographical limitations.

Improved Sales: Many enterprises reported experiencing an increase in their total sales after integrating with e-commerce platforms.

Enhanced Profit Margins: MSMEs noted improvements in profit margins post-integration with digital platforms.

Innovation and Investment: Joining these platforms fostered innovation at the firm level, and many businesses invested in training, new equipment, machinery, and software.

New Products Launching: Integrated MSMEs reported the introduction of new products and improvements in existing product designs.

What are the challenges faced by MSMEs in India?

Access to Opportunities: Many MSMEs find it hard to access new markets and customers, which limits their growth.

Adoption of E-commerce: Informational barriers and limited capabilities prevent some MSMEs from integrating with e-commerce platforms, which could have expanded their market reach and improved profitability.

Skilled Labour: MSMEs face difficulties in finding and training skilled employees to leverage new business practices and technologies.

Inequality in Adoption: The selective adoption of e-commerce and digital technologies is creating inequities between integrated and non-integrated MSMEs, impacting overall industrial structure and competitiveness.

What should be done?

Invest in Technology: There should be investments in technology to help firms adopt e-commerce successfully.

Enhance Digital Skills: Providing training in digital skills is crucial for utilizing e-commerce platforms effectively.

Address Information Barriers: Efforts should be made to address informational barriers that prevent MSMEs from adopting new technologies.

Provide Support Services: Offering enterprise support, training, and infrastructure services will enhance the competitiveness of non-integrated MSMEs.

Enhance Access to Financial Services: Improving access to financial services will enable more MSMEs to benefit from e-commerce adoption.