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MSMEs need a digital boost; digital adoption and maturity sector is suboptimal

As India charts an ambitious path to becoming a $5 trillion economy over the next decade, its over 63 million MSMEs are poised to be the engines driving inclusive growth, grassroots innovation, and large-scale employment. Contributing a robust 30% to the nation’s GDP, MSMEs have generated livelihoods for a staggering 110 million Indians. The MSME ministry’s annual report highlights that over half of Indian MSMEs are rural-based playing a pivotal role in balanced regional development, while one-fifth are owned by women entrepreneurs.

However, the sector’s overall digital maturity and technology adoption remain suboptimal.

Vi Business, the enterprise arm of the Vodafone Idea, conducted a nationwide ReadyForNext assessment encompassing nearly one lakh MSMEs, which unveiled that less than 60% of them have embraced digitalisation across various verticals. Although logistics, media, and manufacturing show higher digital readiness, traditional MSME-heavy sectors like retail, education, and hospitality lag in adopting modern solutions. Urgent action is needed to accelerate technology integration, especially with emerging Industry 4.0 technologies such as cloud computing, Internet of Things (IoT), AI and data analytics becoming key competitive advantages.

Despite 54% of the surveyed MSMEs facing obstacles in deploying IoT solutions, projections indicate a significant opportunity in India’s MSME digital services market. Estimates suggest this market could expand six-fold from its current $1.5 billion to over $9 billion by FY2025 driven by increasing demand for digital business solutions. Lack of awareness about affordable solutions continue constraining the sector’s technology transformation roadmap. As a result, MSMEs continue to rely on suboptimal, dated systems hindering their ability to compete in an increasingly digital-first global marketplace.

Recognising MSME’s pivotal role in realising the national vision, the Centre has made concerted digitalisation of the sector a key policy priority—referring to them as ‘Saptarishi’ propelling India’s Amrit Kaal economic resurgence in the Union Budget for 2023-24. The financial year’s provisions incorporate several measures including the Open Network for Digital Commerce (ONDC) initiative to democratise e-commerce opportunities. Other measures are a dedicated ‘Digital MSME Scheme’, a network of ‘Technology Centre’ facilities to accelerate deep tech adoption, integration of DigiLocker and a Credit Guarantee Scheme framework for collateral-free lending through banks and NBFCs.

To seize this opportunity, strategic collaboration across sectors is essential. Partnerships between domain-leading digital solutions providers and national technology enablers like telecom operators can create synergies to guide MSMEs’ digital transformation journeys. With the right policy impetus, ecosystem support and contextual technology solutions, these nation-builders can fully embrace data-driven technologies as a great force multiplier to unlock new frontiers of growth and resilience.