A latest survey ‘Leveraging E-commerce for the Growth of MSMEs‘, done by the Indian Council for Research on International Economic Relations (ICRIER), conducted between November 2022 and January 2023, covering 2007 MSMEs registered on the UDYAM platforms was done to ascertain the level of digital integration and the benefits it brings for MSMEs in India. Of the 2007 MSMEs, 65% of the businesses were micro, 19% were small and the remaining 16% were medium.
The findings of the survey revealed that MSMEs integrated with E-commerce platforms have been able to achieve greater market access, with digital adoption and technology may be posing a survival threat than an opportunity for businesses who are yet to join e-commerce platforms in India.
The key takeaways, from the survey are listed below:
- Non-integration with e-commerce platforms today can pose challenges for MSME survival in India, at a time when digital platforms are expanding access to wider markets.
- The growth in MSME ecosystem has been supported by online e-commerce avenues, with total sales increasing from 12% (in 2018-19) to 27% (in 2020-21).
- MSMEs integrated with e-commerce platforms have witnessed positive gains through higher sales, investments, innovation and are more likely to be export oriented.
- In 48% of non-integrated businesses, lack of proper knowledge surrounding digital adoption has been pointed out to be an issue.
Integration with e-commerce platforms a growth-enabler for export-oriented MSMEs
MSMEs integrated with e-commerce platforms have reported significant benefits, including increased sales and profit margins. Integrated firms showed higher turnovers, with a majority reporting a turnover of more than Rs 5 million. E-commerce integration is particularly beneficial for exporting MSMEs, with a significant proportion being integrated with e-commerce platforms.
Policy interventions, capacity building key drivers for digital adoption and integration
While the current e-commerce penetration among MSMEs is relatively low, it is expected to grow substantially in the coming years, reaching 5-6% by 2027, according to a RedSeer report. This indicates the increasing importance of e-commerce platforms for the growth and competitiveness of MSMEs in India. However, there remains a significant need for policymakers and stakeholders to address these disparities and bridge the gap between integrated and non-integrated firms. Concerns about their own internal capabilities to benefit from such platforms have also been seen as another issue. To address these challenges, investments in technology, digital skills, information access, and complementary factors to e-commerce adoption are necessary. Additionally, enhancing the capabilities and productivity of MSMEs through infrastructure services, financial support, managerial training, and enterprise support is crucial.
