Issues Plaguing Indian MSMEs Stem From Historical Challenges: IndiaMart COO
The primary issues plaguing Indian micro, small and medium enterprises (MSMEs) stem from historical challenges, such as inadequate and untimely credit, compounded by the predominant use of cash transactions and insufficient record-keeping, said Dinesh Gulati, Chief Operating Officer (COO), IndiaMart in an interview with BW Businessworld.
Interestingly, a joint report by Global Alliance for Mass Entrepreneurship (GAME), Dun & Bradstreet and Omidyar Network India also stated that the issue is not new or the result of the pandemic. The proportion of MSME sales stuck as delayed account receivables have been consistent and steady for years prior to the pandemic.
Although the Covid-19 did intensify the problem, the numbers in the preceding five years were no less alarming. Notably, an estimated 5.9 per cent of the gross value added (GVA) in the Indian economy— Rs 10.7 lakh crore is locked up in delayed payments from buyers to MSME suppliers, as per the report.
IndiaMart's Gulati added, "Collaboration between the government and private organisations is also pivotal in resolving credit facilitation issues. Online marketplaces can serve as vital intermediaries, integrating financial services and providing detailed data on MSMEs." Edited excerpts:
Indian MSMEs face several issues such as high debt and delayed payments. How do you see the global demand for Indian SME products at the current times?
The primary issues plaguing MSMEs in India stem from historical challenges, such as inadequate and untimely credit, compounded by the predominant use of cash transactions and insufficient record-keeping. The government initiatives like GSTN, e-way bills, MSME Udyog Aadhar and NPCI are enabling businesses manifold.
Collaboration between the government and private organisations is also pivotal in resolving credit facilitation issues. Online marketplaces can serve as vital intermediaries, integrating financial services and providing detailed data on MSMEs. Moreover, initiatives such as OCEN and Account Aggregators will further enable businesses by facilitating the various aspects of the lending value chain.
Fintech and bill discounting platforms are also able to generate data such as cash flow, early payment behavior, frequency of payments, etc. This data, in turn, enables banks and NBFCs to tailor financial products and extend collateral-free low-risk loans.
One District One Product (ODOP) is another such export initiative to promote Indian products coming from smaller towns and artisans. Over 730 districts are being promoted as export bubs and export plans have been prepared for identified products and services to support local exporters or manufacturers.
What support IndiaMart is extending to sellers and how does your company see the future of small sellers on the platform?
IndiaMart is committed to address the fundamental challenges faced by Indian MSMEs, focusing on the key areas namely access to market, technology and finance. Our focus is to enable MSMEs and handholding them in their digital transformation journey.
For the 77 lakh suppliers within our ecosystem, we provide free listings, ensuring that businesses of all sizes and from every corner of the nation receive essential online visibility. Our services to sellers include online visibility, request for quotations, cloud telephony, CRM manager, accounting solutions, business enablement – SaaS and logistics SaaS.
Conversely, we are serving 18 crore buyers where we offer the convenience of price discovery across 56 industries and over 97,000 categories which is in general a huge barrier for businesses from smaller cities.
Your company operates in a highly competitive ecommerce market. How would you ensure that the company's operations remain agile and responsive to market dynamics during the festive season?
IndiaMart prides itself on maintaining a balanced marketplace that represents over 56 industries, ensuring no single industry dominates the platform. This diversity is a key strength that sets the foundation for our operational agility, especially during periods of significant market dynamics and seasonality.
Through a large pool of historical data on user behaviour, helps us in planning our initiatives proactively instead of having reactionary measures. These insights provide a deep understanding of seasonality and festivities, allowing us to proactively plan for anticipated shifts.
Our category teams work closely with industries, continuously enriching categories to facilitate the discovery and fulfillment of demand. For example, during harvesting and sowing seasons, we observe a surge in tractors, farm implements, seeds and chemicals, while festive seasons like Diwali witness substantial growth in categories such as god statues, gift items, decoratives, lights, home and bedroom furniture, home appliances and more.
During Covid-19, IndiaMart focused on health supplies category such as sanitisation, hygiene, medical products and related raw materials such as face masks, sanitizer-making machines and patient monitoring systems.
A report by the ICRIER, MSMEs that are not integrated with ecommerce platforms are likely to find it more challenging to access markets. What are your views on this?
Digital transformation gives an edge to businesses in terms of creating a reach for their products and services, building marketing tools and analytics to sharpen their strategy, building competitiveness, increasing trust and getting online customers. Thanks to the ease of GST, e-way bills and demonetisation, the speed of formalisation of businesses has assumed a healthy pace.
Covid-19 further accentuated the need to go online for businesses of all sizes and demographics. The ease of payment- UPI and other payment solutions are reflected in the 4 times growth of UPI transaction volume. It has also been reported that more than 72 per cent of MSME transactions take place online.
I feel there is a huge potential for further growth of online commerce and conversational platforms. Ecommerce companies and online marketplaces need to keep evolving as per the needs of MSMEs to be able to offer services that can make their digital transformation journey easier than ever before.
While there are gains to MSMEs by integrating with ecommerce platforms, it is important to recognise that for firms that are unable to join, technology may represent a survival threat rather than an opportunity. Do you agree with this statement?
The statement underscores a critical reality for MSMEs regarding technology integration and its implications. While acknowledging the widespread awareness of digital platforms and tools, the key challenge lies in facilitating a seamless transition for MSMEs to harness technology for their business growth.
Contrary to viewing technology as a survival threat, it should be seen as an indispensable tool offering substantial benefits. These advantages include enhancing competitiveness, tapping into a broader customer base, accessing valuable customer data and insights into buying behavior, establishing a digital presence that fosters trust and optimising various processes such as marketing, invoicing, logistics management and data management and above all at an extremely reasonable and affordable cost.
A pivotal consideration is understanding how users interact with technology. In the case of IndiaMart, a notable shift from 60 to 80 per cent of traffic coming from mobile devices highlights the evolving user behavior. Tailoring products for mobile users is imperative, recognising the constraints of smaller screens and the need for a user-friendly experience. The emphasis on delivering a seamless user experience is paramount, as any delay or inconvenience can lead to users bouncing away.
The role of technology extends beyond mere tools; it requires a profound understanding of user behavior, data utilisation, effective design and the holistic delivery of these elements to bring value to all stakeholders. This comprehensive approach ensures that technology integration is not just a necessity but a strategic enabler for MSMEs.
Can you tell us, what are the internal goals and strategies your company is planning to take in the upcoming time to take the growth one step forward?
A key objective of our growth strategy is to enhance the adoption of IndiaMart’s platform by increasing the number of buyers and suppliers, whether small, medium, or large enterprises. In order to further drive advantage of tech stack and enable SMEs, we plan to expand our reach and customer services by adding regional offices and teams to cater to the diversity, especially in the non-metro cities.
Recognising the vital role of accounting, we've acquired busy and livekeeping and invested in Vyapar and Realbooks. These moves align with our long-term goal of solving various fintech-related problems for businesses be it taxation, GST, credit-lending, inventory management, invoicing or distribution management.
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