MSMEs Under-digitised Despite Contributing 30% To GDP; 45% To Exports: Report

Despite their crucial economic role in contributing 30 per cent to gross domestic product (GDP) and 45 per cent to exports, micro, small and medium enterprises (MSMEs) remain significantly under-digitised with only around 12 per cent  (7.7 million) having achieved digital maturity, despite their economic significance, according to a report by Forvis Mazars in India, an audit, tax and advisory services firm.

The Covid-19 pandemic accelerated their digital leap, particularly in ecommerce, with MSMEs' share in online sales surging from 12 per cent in 2018-2019 to 27 per cent in 2020-2021. This surge underscores the growing digital readiness among MSMEs, as evidenced by increased seller registrations on major e-commerce platforms and heightened activity on the Government e-Marketplace (GeM).

The report emphasised that MSMEs must adopt comprehensive digitalisation strategies to remain competitive in a technology-driven world, necessitating a strategic overhaul of business operations to seamlessly integrate technology into every aspect of their functions.

It also delved into the promising opportunities and critical challenges associated with digitising MSMEs. MSMEs in India are considerably under-digitised, with only around 12 per cent  (7.7 million) having achieved digital maturity, despite their economic significance. 

The majority are still navigating various stages of the digital journey. This underscores the urgent need for digitalisation to help MSMEs maintain competitiveness in an increasingly technology-driven landscape. The report emphasised that digitalisation goes beyond mere digitisation; it involves a comprehensive overhaul of business and operational frameworks to align with contemporary technological standards. 

Unlike digitisation, which focuses on converting analogue processes into digital formats, digitalisation necessitates a strategic paradigm shift, integrating technology seamlessly into every facet of enterprise operations. Sanjay Bhardwaj, Associate Partner, Government, Infrastructure, Development Sector Advisory Service, Forvis Mazars in India stated, “Despite the challenges, MSMEs continue to be the backbone of the Indian economy, contributing significantly to GDP and exports. Our report highlights the urgent need for a comprehensive digital strategy to empower these enterprises.”

According to Bhardwaj, by prioritising education, encouraging targeted investments, and fostering regulatory understanding, we can create an environment where MSMEs not only survive but thrive in the digital age. Timing and approach are paramount in digitalisation efforts for MSMEs, as rushed or excessive adoption can lead to inefficiencies and operational hurdles. 

The report advocated for a phased and strategic approach to digital transformation, highlighting key areas such as enhancing digital literacy and skills, strategic investment planning, streamlining regulations and fostering collaborative initiatives between the public and private sectors.