India’s micro, small and medium enterprises spend an estimated Rs 124.9 lakh crore a year on procurement, but only 17.6% of that, or roughly Rs 22 lakh crore, moves through digital channels, according to the India Digital Procurement Report 2026 released by the India SME Forum (ISF) in partnership with Amazon Business on Thursday.

The report based on responses from 27,045 MSMEs drawn from a 30-question survey sent to 54,000 enterprises is extrapolated to India’s 51.5 million Udyam-registered MSMEs using a proprietary procurement model built on Udyam data.

Fewer than 4% of surveyed enterprises have fully integrated, end-to-end digital procurement, while about 14% are not integrated at all and simply place orders online. Of the respondents, 61.7% procure at least part of their requirement digitally, while 38.3% do not. Among those still entirely offline, 38% said they intend to shift soon and 1.7% ruled it out entirely.

Intent, however, runs ahead of adoption. Four in five enterprises, or 80.4%, expect digital procurement to play a major role in expanding their business over the next three years, 61.5% plan to increase their use of digital procurement tools, and 49.7% expect to adopt AI-led procurement solutions within two years.

“For too long, procurement has been treated as a routine operational expense rather than a strategic lever for MSME competitiveness,” Kumar said, adding that the next frontier lies in moving enterprises from occasional online purchasing to fully integrated, data-driven procurement.

The biggest barrier is awareness rather than cost. Most enterprises that are not buying online said they simply did not know it was an option, and continue to source from within their own cluster or catchment area, Kumar said. Tax registration is the other constraint: of 51.5 million Udyam-registered MSMEs, only about 12.7 million are GST registered, which leaves the rest unable to claim input tax credit and therefore with little incentive to move online, the report added. 

That shows up in what MSMEs say they want. GST-compliant invoicing influences the choice of procurement platform for 59.5% of respondents, while 49.9% prioritise flexible payment and credit facilities. 

On platform preference, 32.6% of respondents named Amazon Business as offering the best supplier network, followed by Meesho at 14.2% and Moglix at 11.5%. Amazon Business also led on price transparency with 37.3%. Amazon Business and Moglix were jointly rated highest on overall buyer experience at 9.5 out of 10.