MSMEs In Smaller Cities Need Tech, Credit Boost: IVCA Prez Rajat Tandon

There is a larger India out there. That growth, that entrepreneurial spirit is alive and kicking in tier-2 and tier-3 cities. But MSMEs have this problem of tech adoption, credit line access, and tapping global markets. Making them competitive would be the way forward, Rajat Tandon, President, Indian Venture and Alternate Capital Association (IVCA) has said. 

While speaking at a podcast, he said that micro, small and medium enterprises (MSMEs) will need to integrate new technologies that improve productivity and competitiveness if they are to drive economic growth. Notably, India’s MSME sector, projected to reach USD 1 trillion by 2028, holds immense potential for innovation and job creation, which will be crucial for sustaining this economic momentum.

However, the journey is not without its challenges. Addressing those issues is crucial for ensuring sustainable development and inclusive growth, especially as India's economic landscape undergoes rapid changes. The MSME sector, often described as the foundation of the Indian economy, plays an important role in job creation and innovation. 

The discussion addressed the challenges faced by women entrepreneurs as well. According to the MSME Ministry’s Annual Report 2020-21, only 20 per cent of the 63 million MSMEs in India are owned by women—calling for greater inclusivity and support for women in leadership roles. As Tandon rightly pointed out, women today are risk-takers and decision-makers.

Emphasising the importance of having a supportive environment for business, Tandon said, “MSMEs are the backbone of employment in India. One of the biggest challenges was that there was never a collateral-free loan available for the MSMEs. Skilled labour, regulatory process, access to the global market—these are the challenges that are there. Startups are building for India, the MSMEs are for Bharat. So both of them have to coexist.” 

He also spoke about the need to promote stable, long-term capital flow through private equity, venture capital, and angel capital to ensure a thriving landscape for startups and MSMEs. Drawing on his extensive experience, Tandon shared insights on how MSMEs and technological advancements are shaping India's economic future and the collaborative efforts that are needed to drive sustainable growth.

Meanwhile, he also touched upon the key sectors that are transforming the landscape, including artificial intelligence (AI). India's generative AI (genAI) startup ecosystem has expanded rapidly in recent months, growing 3.6x in the first half of 2024. The growth is broad-based and spans infrastructure, applications, and services, highlighting the increasing significance of AI in the economy. 

Tandon noted that AI is more than just a technological innovation; it has the potential to drive job creation and enhance human capabilities. Paul added that the future of work will rely heavily on society's ability to adapt to these technological shifts while maintaining an optimistic outlook.