According to a FICCI survey, SMEs in India can also take advantage of Digital Public Infrastructure (DPI) to improve their access to finance and access to markets
Our Bureau
New Delhi
Digitalization has gained traction with small and medium enterprises (SMEs) in India increasingly adopting technology and digital solutions to enhance their competitiveness. This includes the use of e-commerce platforms, digital marketing, cloud computing, and automation tools.
According to a FICCI Report on SMEs in India, the sector is adapting to the digital transformation and adopting sustainability practices; it identifies the challenges in this regard and, more importantly, makes specific recommendations on how to overcome them.
The survey reveals that SMEs have been utilizing digital technology across different business functions, with 60 per cent of enterprises using digital tools for human resources, 51 per cent for sales and marketing, and 48 per cent for finance.
Most of the firms have experienced improvements in productivity and reductions in operational costs as a result of incorporating digital technology into their business functions. Approximately 35 per cent of respondents reported a reduction in their annual operational costs by 11-20 per cent as a result of digitalization. Another 30 per cent of respondents indicated that their annual operational costs had decreased by more than 20 per cent.
SMEs have also been leveraging e-commerce platforms and online marketplaces to reach a larger customer base and expand their market presence.
These platforms provide opportunities for SMEs to showcase and sell their products nationally and globally. In terms of online markets and sales platforms, a significant 71 per cent of participating enterprises had their own online channels or sales platforms (such as a website to display or sell products).
Amongst the enterprises that reported selling through online channel(s), 24 per cent reported that more than half (50 to 75 per cent) of their overall sales came through online platforms like e-commerce platforms or their own websites.
Another 39 per cent of respondents reported that one-fourth to half of their sales were through such online platforms.
The adoption of online markets and sales platforms has increased their sales, profits as well and reach to customers.
The study also brings to the fore some of the key challenges faced by SMEs in integrating technology into business functions, especially in onboarding on e-commerce platforms.
About 40 per cent of respondents highlighted a lack of skilled resources and technological expertise required to effectively integrate and operate these technologies, as well as limited knowledge of business-specific technology solutions.
While there is a government scheme “Digital MSME” as a part of the Champions Scheme to promote digital adoption amongst MSME enterprises, there is perhaps a need to create greater awareness about the scheme and its utility to the SMEs across India.
SMEs in India can also take advantage of Digital Public Infrastructure (DPI) to improve their access to finance and access to markets. For instance, the GeM (2016) portal for public procurement and the TReDS (2014) platform for receivables financing have been instrumental in the development of SMEs in India.
The survey findings reveal that while there is reasonable awareness about these platforms amongst SMEs, there is a scope for further improving awareness and adoption of these platforms.
Over the past two years, a significant number of surveyed enterprises have taken steps to adopt sustainable practices. The highest proportion of enterprises (41 per cent) implemented measures to eliminate paper usage, demonstrating a growing awareness of the need to reduce waste and conserve resources, conserve water (41 per cent), invest in green projects (39 per cent), etc.
The respondents also highlighted their priority for implementing sustainable practices over the next two years, which included the usage of renewable energy (36 per cent), and investment in green projects (35 per cent).
The enterprises have also reported benefits and cost savings by transitioning to green and sustainable practices including the adoption of water conservation practices.
While the study primarily focused on the digitalization and sustainability preparedness of SMEs in India, the survey and discussions with SMEs also bring to the fore some of the key challenges and issues faced by these enterprises in their day-to-day business. Besides the need for enhancing access to finance, the SMEs also highlighted issues with electricity supply and land leasing.
