DIGITAL TRANSFORMATION IN INDIAN MSMES (Micro, small & medium enterprises)

India’s Micro, Small & Medium Enterprises (MSMEs) sector has been one of the primary drivers country’s industrial production, exports, and employment. MSMEs play a pivotal role in the socio-economic development. It helps in accelerating industrialization in non-traditional and economically backward pockets.

 Up until now, MSMEs have grown at a fast pace due to their lower cost structures stemming from not having to pay benefits such as provident fund and gratuity to employees and excise duty (if turnover is less than 1.5 crore). Such practices have helped MSMEs price their products and services at competitive rates while maintaining operating margins. Nevertheless, India’s shift to the GST regime increases the compliance costs of MSMEs and brings a majority of them into the indirect tax net for the first time. With its compliance system, a structured taxation regime and multiple registrations and returns, the GST regime has the potential to put additional burden on the MSMEs in the short term, thus slowing their growth rates.

 MSMEs also face a number of other challenges including technological obsolescence, supply chain inefficiencies, increasing global competition, uncertain market scenario, and lack of funding.

 Given these challenges, it is critical to build upon the digital literacy in MSMEs to ensure that they make optimal use of the technology-enabled platforms. With their inherent capabilities to grow, digital transformation could be a suitable solution to help truly realize the potential of this sector.

 Digitalization through Cloud Computing for ICT adoption, Big data, Machine Learning, Data Mining & the Internet of Things (IoT) could improve quality of products and services, standardization of their business processes, ERP, accounting, manufacturing design and regulatory compliance's including GST transition, adherence to environmental emission limits prescribed by SPCB/CPCB.

 Digital transformation could enable MSMEs to fulfill the following needs:

·        Access to knowledge and international best practices

·        Operational excellence across wider geographies through real-time insights

achieving resource conservation, energy efficiency & low carbon growth

·        Financial prudence, decision-making and risk mitigation

·        Targeted marketing reach and sales

·        Efficient provisioning of products & services

 Some of the challenges which MSMEs need to overcome for digital transformation include: upfront investment-related costs to implement technology, lack of understanding of business benefits that digitalization can deliver across the value chains & lack of guidance & skilled manpower