Can Small Businesses Spark India's Tech Boom?
In the middle of India’s changing technological scene, a crucial question arises: Can small businesses serve as the driving force propelling India into a new era of tech dominance? This article tried to understand the often-overlooked narrative of Micro, Small, and Medium Enterprises (MSMEs), shedding light on their burgeoning significance and potential as catalysts for India's tech revolution.
The statistics speak volumes about the impact of MSMEs on job creation and economic development. According to Forbes, over the last six years, there has been a remarkable 110% yearly increase in job creation, with MSMEs responsible for generating 120 million jobs across various industries in India. These enterprises, often regarded as the backbone of the country's GDP, have become integral to the government's ambitious goal of achieving a $5 trillion economy.
As acknowledged by Sushma Vasudevan, MD and Partner at BCG India, MSMEs form the backbone of the Indian economy, contributing 30% to the GDP and employing over 11 crore individuals. Recognising their pivotal role, even the government, through the budget, aims to empower MSMEs with timely finances, relevant technologies, and training. The extension of tax benefits and initiatives like Start Up India and Start Up Credit Guarantee schemes further boost the confidence of young entrepreneurs, fostering a conducive environment for tech-driven startups.
The state-specific statistics further draw a line at the robust presence of MSMEs, with Maharashtra leading the way with the maximum Udyam registrations, followed by Tamil Nadu, Uttar Pradesh, Gujarat, and Rajasthan. This geographical distribution reflects the widespread impact of small businesses, reaching both urban and rural areas.
Yuvraj Shidhaye, Founder and Director of TreadBinary, applauds the alignment of the Interim Budget's provisions with the technological needs of MSMEs. The attention to innovation and a corpus of one lakh crore rupees for long-term financing with low/nil interest rates signals a promising boost to research, innovation, and technological advancement. The stress on providing timely finances, relevant technologies, and training seamlessly aligns with the sector's requirements, positioning MSMEs to compete globally.
The development and enhancement of digital infrastructure, which includes the timely adoption and implementation of the 5G services and skill development programs to ensure the tech workforce is well-equipped with the latest skills, will be highly necessary to support the growth and ensure the global competitiveness of MSMEs in the tech sector, believes Shidhaye. Additionally, continuous encouragement and incentive for the creation of tech innovation hubs and developing clearer frameworks to facilitate international collaborations and partnerships will shape an environment conducive to MSME growth and global competitiveness.
Abbhinav R Jain, CFO, AdCounty Media, suggests that strategic policies should be implemented to foster the growth and sustainability of MSMEs amidst economic slowdowns. Better access to credit and the launch of schemes similar to the ones like Credit Guarantee Fund Scheme for MSMEs and Cluster Development Programmes will help eliminate the financial hurdles for this sector. Besides this, reduced GST on raw materials and tax breaks for R&D could potentially ease the financial burden and help this industry direct more investments for innovation and promote job creation.
The provisions in the budget act as a strategic boost, addressing critical areas for these businesses. Akshay Hedge, Co-Founder, ShakeDeal details out the provisions. He thinks that the RAMP (Raising and Accelerating MSME Productivity) Scheme Expansion, focusing on funding for technology upgrades and market access, and the Open Network for Digital Commerce (ONDC), will facilitate entry into diverse e-commerce platforms, showcasing the government's commitment to technological growth:
RAMP Scheme Expansion: The increased funding for the RAMP scheme offers crucial financial and technical support for technology upgrades, digital adoption, and market access. This directly addresses the imperative for MSMEs to embrace technology and enhance operational efficiency.
ONDC: The focus on ONDC empowers MSMEs by facilitating entry into diverse e-commerce platforms without barriers. This initiative has the potential to expand its reach and customer base, fostering online presence and sales.
AI Integration Recognition: Acknowledging the transformative potential of AI in e-commerce platforms is a notable highlight. This recognition brings out the role of AI in streamlining business processes and facilitating informed lending decisions for tech-driven MSMEs.
However, the budget isn't without its limitations. Hedge thinks that a lack of sector-specific focus and the challenge of reaching all MSMEs, given that only half are currently registered on Udyam, might restrict the broader impact of these provisions. Initiatives encouraging wider registration become crucial to ensuring inclusivity.
Streamlined Data Regulations
While the budget acknowledges the transformative potential of AI and digital technologies, regulatory clarity on data sharing and privacy remains essential. Streamlined data regulations are crucial for fostering innovation, ensuring data security, and enabling secure collaboration within the tech ecosystem. Clear guidelines will strike a balance between encouraging innovation and safeguarding sensitive information.
Tax Incentives for IP Development
The budget lacks explicit support for protecting valuable intellectual property (IP) assets, a significant concern for tech-driven MSMEs. Tax incentives for IP development, including breaks for patent filing, research, and development, would not only encourage innovation but also safeguard the competitive edge of small businesses. Such incentives can spur a culture of continuous innovation and technological advancement.
Public-Private Partnerships (PPPs) for Infrastructure
The budget lacks detailed plans for Public-Private Partnerships (PPPs), a critical component for accelerating infrastructure upgrades. Improved roads, internet connectivity, and other infrastructural enhancements are crucial for efficient technology adoption and reducing supply chain bottlenecks. Strategic PPPs can play a major role in building a conducive environment for tech growth among MSMEs.
This comprehensive exploration shows MSMEs as potential leaders in India's tech revolution. The government's initiatives, as reflected in the budget, lay the groundwork for unleashing the technological potential of small businesses. However, challenges persist, and regulatory imperatives, global inspirations, and strategic adaptations are crucial for ensuring the sustained growth and global competitiveness of MSMEs in India's evolving tech landscape. As small businesses stand at the forefront of innovation, the question that echoes is not merely rhetorical but a call to action: Can small businesses truly lead India's tech revolution? The journey has begun, and the collective efforts of government, businesses, and regulatory bodies will shape the answer.
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