Introduction
MSME stands for Micro, Small, and Medium Enterprises, which
play a critical role in India's socioeconomic development. They are significant
economic contributors, acting as its backbone and providing resilience against
global economic challenges (Mukherjee, 2018). This sector is vital for India's
GDP and exports and helps foster entrepreneurship, employing around 110 million
people, particularly in semiurban and rural areas.
As of March 2024, there are 40,042,875 registered MSMEs,
including 39,318,355 microenterprises (97.7%), 608,935 small enterprises
(1.5%), and 55,488 medium sized enterprises (0.8%). The MSME sector
consisting of 36 million units provides employment to over 80 million persons.
The sector through more than 6000 products contributes about 8% to GDP besides
45% to the total manufacturing output and 40% to the exports from the country.
Micro enterprises employ fewer than 10 people, small
enterprises employ 1050, and medium enterprises employ 50250. While many
countries define MSMEs based on workforce size, India categorizes them
according to investment in plant and machinery (Hooi L W, 200).
Challenges Faced by MSMEs
Despite a high growth rate and promising prospects, Indian
MSMEs face several significant constraints. The most notable barriers include:
· Lack of Timely
Credit: Many MSMEs struggle to secure funding when needed.
· Procurement of Raw Materials:
Obtaining raw materials at competitive prices is a challenge.
· Inadequate Infrastructure:
Facilities such as power, water, and road infrastructure are often lacking.
· Shortage of Skilled Manpower and
Technological Backwardness: There is a significant shortage of skilled workers
in manufacturing, services, and marketing. Many MSMEs are unaware of global
technologies, highlighting the need for improved managerial and entrepreneurial
skills. According to the OECD (2013), integrating external knowledge is crucial
for growth, but finding and mastering new technologies can be challenging and
costly (Mukherjee, 2018).
· Lack of access and investment in
technology with inadequate strategy for marketing and advertising. (Mukherjee,
2018)
· Profitability Issues: As MSMEs
expand, maintaining steady profits becomes difficult due to rising costs,
competition, or price cuts.
· Poor Cash Flow: Many businesses
start with limited capital, leading to poor cash flow, which is often the norm.
· High Competition: Standing out in
today’s competitive market is challenging, as products and services can be
easily replicated. Businesses need to enhance customer service, offer exclusive
products, and provide convenience, such as home deliveries.
· Ineffective Marketing: To attract
new customers, SMBs must market and advertise effectively, which can be
resource intensive. Utilizing word-of-mouth recommendations and smartly
leveraging digital media, such as influencer partnerships, can be beneficial.
· Regulatory Compliance: Navigating
the complex regulatory landscape poses significant challenges for MSMEs in
India. Compliance with labor laws, environmental regulations, and taxation
norms can be time-consuming and costly.
· Technological Advancements: Due to
limited funds and expertise, many MSMEs struggle to keep up with technological
advancements. This technological gap can result in operational inefficiencies,
reduced competitiveness, and an inability to meet market demands.
Digital Literacy
Digital literacy is the ability to effectively use
information and communication technology (ICT) to find, evaluate, create, and
share content. It is essential for effective communication, and supporting
skills such as collaboration and critical thinking. For micro, small, and
medium-sized enterprises (MSMEs), digital literacy is crucial for connecting
with customers and improving operations. It them compete in a rapidly changing
technological landscape. However, many MSMEs struggle with managing digital platforms,
affecting their marketing and financing efforts.
According to the Indian National Statistical Office, a digitally literate
person can navigate the Internet and use social media effectively. While more
than 55 percent of Indians have broadband access, only 20 percent can use the
Internet effectively. This highlights the digital divide, which goes beyond
access to include meaningful technology use.
Need For E-Commerce
- To
Increase employee satisfaction and engagement
- To
Make your business more resilient and adaptive to change
- To
Put your company on a digital-first footing
- To
Automate business processes and monitor them using a computer
- To
Attract new customers and make them spend more
E-Commerce
E-commerce, or electronic commerce, encompasses a variety of
online business activities involving the buying and selling of products and
services through the Internet. It enables transactions where parties interact
electronically instead of physically, using digital communication and
technology to create value among organizations and individuals (Gupta, 2014).
Often called market-making, e-commerce connects sellers and buyers globally in
cyberspace (Tian et al., 2018). The rise of e-commerce has significantly
transformed business dynamics, diminishing the differences between traditional
and electronic markets. In India, the e-commerce sector is projected to grow by
23.8% in 2024, fueled by increased online shopping and internet access. The
market is expected to expand from $147.3 billion (INR 12.2 trillion) in 2024 to
$292.3 billion (INR 24.1 trillion) by 2028, reflecting an 18.7% compound annual
growth rate.
Need For E-Commerce
· Lower Prices - E-commerce
minimizes operating costs, resulting in lower prices and easier access to
discounts for consumers.
· Wider Customer Base - Selling online
eliminates geographical barriers, allowing businesses to reach customers
worldwide.[1]
· Easier to Scale Up - Expanding an
online store is more cost-effective than scaling a physical store, requiring
only additional inventory.
· Enhanced Customer Experience-
E-commerce platforms improve the shopping experience, driving higher customer
satisfaction and loyalty.
· Improved Inventory Management -
Real-time inventory tracking helps prevent stock issues and streamlines
inventory processes.[2]
 |
| Source: MSME Act 2006 |
Micro, Small, and Medium Enterprises (MSMEs) often hesitate to adopt digital technologies due to a lack of funding and insufficient skilled personnel who are well-versed in the latest platforms and technologies. Many small business owners are not fully aware of the impact that digital technology can have on their operations, which hinders their ability to attract new customers and retain existing ones. In response to this challenge, the Government of India has introduced the Digital MSME scheme to empower these enterprises digitally. This initiative aims to increase awareness and promote the adoption of information and communication technology (ICT) among MSMEs, encouraging them to integrate ICT tools into their business processes. The scheme also emphasizes the importance of e-platforms and promotes digital marketing within the MSME sector.
The Government of India is
particularly encouraging these businesses to market their products on
e-commerce sites, especially through government-owned platforms like the
e-Marketplace (GeM), which is utilized by various ministries and public sector
undertakings (PSUs) for procurement purposes.
Another important initiative is
the Digital India Scheme, which aims to establish a strong digital presence for
Indian MSMEs. Programs such as Jeevan Pramaan, Mobile Seva,
and BHIM by NPCI are part of the efforts to transition MSMEs
to a cashless, contactless e-commerce environment.
Skill India, initiated by
the National Skill Development Corporation, connects various industries with
trainers who assist entrepreneurs in developing the skills necessary for their
businesses.
BharatNet is another
initiative aimed at boosting e-commerce growth for small businesses by
providing broadband connectivity to 250,000 gram panchayats across the country.
This infrastructure ensures that small business owners have access to the
internet to operate their businesses online. It also facilitates e-governance,
enabling access to government websites and online services like banking.[1]
Open Network for Digital
Commerce (ONDC) is a public technology initiative launched by the
Government of India to promote an open Network for Digital E-commerce (ONDC)
and digital transformation enables rural E-commerce can lift and improve the
economy and Entrepreneurship of rural areas and sustainability
Investment in plant and
machinery, along with Udyam registration, is vital for accessing benefits under
the MSME Development Act. This registration allows small and medium enterprises
(SMEs) to obtain a Zero Defect & Zero Effect (ZED) certificate, thereby
enhancing their competitiveness and sustainability. Equity infusion is
available through mechanisms such as the Fund of Funds and the
Production-Linked Incentive (PLI) Scheme. Initiatives like the Pradhan Mantri
Kaushal Vikas Yojana (PMKVY) prioritize workforce skill development. The ONDC
e-Commerce platform supports MSMEs, while the RBI fosters digital lending.
Collectively, these initiatives aim to empower MSMEs in a digital and global
marketplace.(Mahesh K. M, et.al ,2023)
Conclusion
Digital literacy and e-commerce
hold significant promise for transforming micro, small, and medium enterprises
(MSMEs), enabling them to compete more effectively in a globalized economy.
Although challenges persist, the strategic adoption of digital tools can
stimulate growth, enhance efficiency, and ensure resilience in our increasingly
digital landscape. Mastering digital literacy and e-commerce is essential for
the survival and expansion of MSMEs in today’s digital economy, providing them
with the means to broaden their reach, cut operational costs, and engage
customers in innovative ways.
By embracing e-commerce, MSMEs
can overcome conventional geographical and logistical barriers, gaining access
to global markets and competing alongside larger enterprises. Additionally,
digital tools facilitate the optimization of various operations, including
inventory management and targeted marketing, thereby fostering both efficiency
and scalability.
However, the transition to
digital platforms is fraught with challenges. Limited digital skills, financial
constraints, cybersecurity risks, and infrastructure deficiencies continue to
impede many MSMEs. Nonetheless, through a concerted effort involving stakeholders—such
as governments, private enterprises, and industry associations—these obstacles
can be surmounted. Initiatives aimed at enhancing digital literacy, providing
financial support, and developing digital infrastructure are critical for leveling
the playing field for MSMEs.The role of government in advancing digital
literacy and e-commerce for MSMEs is pivotal in driving economic growth, job
creation, and social development. By addressing infrastructure gaps, improving
digital skills, and offering financial and regulatory support, governments can
empower MSMEs to thrive in the digital era. A collaborative approach that
engages both public and private stakeholders can cultivate a robust ecosystem
where MSMEs can compete, innovate, and make significant contributions to both
national and global economies.
In summary, the integration of
digital literacy and e-commerce into MSMEs represents not just a path to
economic growth but also a catalyst for innovation, resilience, and
inclusivity. By leveraging these tools, MSMEs can unlock their full potential,
significantly contribute to local and global economies, and maintain their
relevance in an ever-evolving marketplace.
References
