‘Startups’ role in pushing MSMEs to new heights can’t be downplayed; collaboration may be game-changer’

Updated: Sep 30, 2020 12:28 PM

Technology for MSMEs: The pandemic is a watershed moment for the MSME sector and has made it imperative for the MSME businesses to digitally re-orient their workplaces, re-imagine their business practices and identify the right trajectory for growth.

According to the Commission, in recent years, India has redoubled its efforts to improve its AI infrastructure.
  • By Arvind Sharma

Technology for MSMEs: With a contribution of 29 per cent of the GDP and more than 50 per cent of the exports, the MSME sector is the key engine of economic growth and backbone of the Indian economy. The MSME sector, which hitherto is grappling with various issues such as inadequate finances, regulatory bottlenecks, infrastructural deficiency and outdated technology, has survived demonetization and GST implementation and is now gearing up to tide over the Covid-19 crisis. The pandemic is a watershed moment for the MSME sector and has made it imperative for the MSME businesses to digitally re-orient their workplaces, re-imagine their business practices and identify the right trajectory for growth, especially during the lockdowns.

A survey conducted by Endurance International Group, an IT services company specialized in web hosting, revealed that 30 per cent of MSMEs have started a business website or engaged in e-commerce since the lockdown and more than 50 per cent of the MSMEs adopted video conferencing tools and WhatsApp to ensure business continuity. Another notable example is an excellent collaboration between Mother Dairy and IBM which enabled 500 employees of Mother Dairy to work from home by utilizing a virtual computing environment and Mother Dairy’s data centre.

I am sure, technological upgradation was on the to-do list for most MSMEs, but the Covid-19 pandemic made it a top priority item, for virtually every MSME. In this critical scenario, the MSMEs would have to quickly transform to an online business model and embrace digital technology in key areas such as managing inventory, undertaking sales and marketing, maintaining accounts and pushing business growth with optimal costs.

MSMEs will have to adopt technology with digital-oriented solutions for listing on e-commerce portals, gaining customers, increasing revenues and getting swift access to digital payments. MSMEs will have to look for new supply chains, innovative delivery mechanisms, and the immediate objective should be to tide through the crisis as opposed to increasing revenues.

Further, since more foreign players are looking to shift their base to India, MSMEs need to adopt best global practices and manufacture products that are internationally competitive. Promoting innovation is crucial to achieving skill upgradation and developing indigenous technological know-how. It is notable that the Government of India (GOI) has launched MSME Ideas Portal ideas.msme.gov.in, an MSME bank of schemes, ideas, innovation and research, where individuals can upload their ideas, innovations and researches relating to MSME sector. The MSME portal also facilitates inflow of venture capital and foreign collaboration.

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No doubt, with the aid of technology, Indian MSMEs would go a long way in becoming globally competitive, productive and efficient. Timely guidance toward achieving technological upgradation is another important aspect.

Many steps are already in place towards achieving this objective – for instance, the Global Bharat program, exclusive for MSME businesses, launched by SAP enables Indian MSMEs to become globally competitive by equipping them with digital technologies, with its three-fold objective – access to the global marketplace, digital skilling initiatives and digitally transforming business. Further, Zoho has collaborated with NASSCOM Foundation for Big Tech program where non-profit businesses are provided with necessary technology tools.

The GOI is also lending its helping hand – for instance, the Reserve Bank of India approved e-KYC norms would help MSMEs to avail instant credit and unlock their true potential. Needless to mention, this is in addition to the Atmanirbhar Bharat reforms announced by the GOI which include Rs 3 lakh crore collateral-free loans, Rs 20,000-crore subordinate debt, Rs 50,000 crore equity infusion and revised definition of MSMEs, among others.

Adopting digital technology provides the best opportunity for MSMEs to cement their position in the Indian economy and there has never been a better time for the MSMEs to use it and make themselves globally competitive.

The role of startups in pushing the MSMEs to greater heights cannot be downplayed. Startups, beaming with technologies, have the potential to disrupt markets, and collaboration between startups and MSMEs can be seen as a game-changer. It is important that innovation by MSMEs needs to go in every stage – procuring raw materials and man-power, and undertaking manufacturing and digital marketing. Advanced tools such as artificial intelligence, machine learning, blockchain technology can be effectively implemented to refurbish their business models. To the extent feasible, efforts should be made by MSMEs to move off-line activities to an omnichannel platform.

Arvind Sharma is Partner at Shardul Amarchand Mangaldas & Co. Views expressed are the author’s own.

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