Technology for MSMEs: India is known for its vibrant entrepreneurial spirit and thriving small businesses. With over 63.39 million micro, small, and medium enterprises (MSMEs), these entities contribute more than 33 per cent to the nation’s GDP and employment. Undoubtedly, they play a crucial role in India’s economic growth. While the Indian government has been actively implementing policies, subsidies, and projects to support the growth of MSMEs, it’s important to consider the merits of this approach. It is not subsidies but a conducive business environment that helps businesses to scale and grow organically.
Experts and industry associations while lauding the government’s current approach, which heavily focuses on providing credit guarantees and financial assistance to MSMEs have been advocating for an environment that facilitates their expansion. In my view, the government by helping one crore small sellers to sell on marketplaces and others can kickstart a slugging economy owing to global slowdown on one hand and on the other start creating employment opportunities in the country. Additionally, this approach will take away the possibility of corruption as there is no transfer of money waiting to happen.
However, it is important to note that overregulation is proving to be a challenge for smaller sellers as the burden of compliance is weighing them down. The government wants to create a level playing field through a regulatory approach which ironically is working against the small seller only who thrive in a competitive marketplace environment.
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The retail landscape
The shopping experience in India changed nine years ago with the current government taking charge and marketplaces providing sellers with the opportunity to list their products. Indian consumers experienced for the first time a concept of exchange or return of products; select a product by comparing specifications of similar products offered by different brands and competitive pricing. The day and age of Maximum Retail Price gave way to a more competitive model where consumers received discounts for their purchases. This change also meant that the government focused on ease of doing business and simplified many historical and archaic practices.
However, in recent times, the change in approach from enabling to regulation is hindering the broader adoption of e-commerce. This industry has experienced rapid growth in recent years and presents significant opportunities for MSMEs to access broader markets and enhance their competitiveness. In the recent past, several compliances, regulations and restrictions have been imposed on e-commerce platforms and sellers. The government’s idea of one nation one tax is yet to be implemented in the true spirit and similarly, some of the proposed regulations like data localisation or fallback liability are creating major challenges.
While regulations may be well-intentioned to protect local businesses, stringent rules often stifle growth and innovation. Requirements for e-commerce platforms to operate solely as facilitators, limitations on discounting practices, and restrictions on inventory control act as roadblocks to the sector’s expansion. Instead of nurturing a competitive and dynamic e-commerce ecosystem, excessive regulation presents significant challenges for Indian retailers to effectively compete on digital platforms.
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It is crucial for the government to simplify and rationalise the regulatory framework, and provide support to upgrade technology, skills, and quality. Here are some supportive measures that would benefit MSMEs immensely :
Simplifying the regulatory framework: Reducing the compliance burden on businesses by streamlining processes, consolidating licenses and permits, and adopting a single-window clearance system. This will enable businesses to focus on their core operations, improving efficiency and productivity.
Encouraging digital adoption: Promoting digital adoption among MSMEs levels the playing field and enables them to compete with larger businesses. By providing affordable and accessible digital infrastructure, the government can help small businesses leverage digital platforms for marketing, sales, and operations, ultimately driving growth and revenue generation.
Addressing infrastructure bottlenecks: Inadequate transport facilities, power shortages, and poor connectivity significantly impact the growth of MSMEs. The government needs to prioritise infrastructure investments in areas such as roads, bridges, and digital connectivity to enhance accessibility and reduce operational costs for businesses.
Ensuring access to finance: Access to finance remains a significant challenge for MSMEs in India. While the government has implemented various schemes such as Mudra loans and credit guarantee funds, there’s a need to expand their scope and reach to ensure wider coverage. Additionally, efforts should be made to improve the credit ecosystem, including credit information systems, collateral frameworks, and regulatory frameworks, to facilitate easier access to credit for MSMEs.
From introducing new-age shopping experiences for customers, guiding online marketplaces including government platforms such as ONDC and GeM can sustain the seller ecosystem.
Hence, digitising one crore sellers to sell online could be the impetus the sector requires!
Anil Bhardwaj is the Secretary General of the Federation of Indian Micro Small & Medium Enterprises (FISME). Views expressed are the author’s own.