Indian small and medium enterprises (SMEs) are heavily affected by the ongoing coronavirus pandemic, especially after the second deadly wave. However, it still holds the power and ability to play a significant role in the development of Indian economy, especially in rural areas.
According to World Bank estimates, SMEs account for around 90% of businesses and more than 50% of employment worldwide.
Sanjeev Kumar, CEO of Spice Money, said, “MSMEs are one of the strongest pillars for driving the growth of the Indian economy. There are over 63 million MSMEs in India providing employment to almost 100 million people residing in remote areas.
After India’s digital revolution with Prime Minister Narendra Modi’s ‘Digital India’, MSMEs in rural areas can leverage an online marketplace for business growth, which can further boost the rural economy.
While talking about leveraging the online market, Kumar said, “Taking advantage of the online market has become a necessity for MSMEs to ensure that their products reach customers living in remote parts of the country. The increased penetration of mobile and Internet connections in rural and semi-urban urban areas has enabled customers to purchase products online with a simple click on their smartphone. Its potential was clearly visible during the pandemic-induced lockdown, when purchases on e-commerce sites increased at an exponential rate.
Formal SMEs contribute up to 40% of national income (gross domestic product, GDP) in developing economies. According to World Bank estimates, 600 million jobs will be needed by 2030 to absorb the growing global workforce, making SME development a high priority for many governments around the world. worldwide.
“The e-marketplace model can also help MSMEs increase exports of the products they produce across the world. Even with the existing advantages of the e-marketplace model, very few MSMEs sell and export their products online due to lack of digital skills and skepticism to embrace new business models Majority of companies refrain from sharing data with the online market Along with this, lack of transparency in dispute resolution processes poses an additional challenge for the adoption of online marketplace models among MSMEs,” Kumar mentioned.
Apart from road connectivity, rural India also needs digital connectivity, through which it can expand its business. According to the World Bank, India had 20.95 ATMs per 100,000 adults in 2019, which is very low compared to other countries. While more than 65% of India’s population resides in rural India, rural areas account for only 20% of all ATMs in India.
“Strategic partnerships between government and fintech players, especially those focused on rural areas, can help address these challenges. Furthermore, it is crucial to set up training programs for the MSME sector to bridge the existing gap. Some countries have already introduced policies encouraging small businesses to use online platforms and we should also take the necessary steps to speed up the process. Early results may be limited, but it will help increase the sector’s growth potential in the long term,” Kumar said.