5 Emerging Technologies that benefit MSMEs in India

In this article, we will take you through a few emerging technologies that MSMEs in India should adapt to and experience how each technology helps them address their daily business challenges. 

MSMEs and their sustained contribution to Indian economy 

As we celebrate MSME Day on June 27th, it’s important to acknowledge and celebrate the significant role that Micro, Small and Medium Enterprises (MSMEs) lead in Indian economy. They are the backbone of our economy, contributing significantly to India’s GDP and employment (predominantly, at the local level). 

The scale and magnitude of MSMEs in India : 

• As of July 1st 2023, Total Registered MSMEs are 1,72,16,159 (Udyam)  (Micro business enterprises are 1,65,41,306 i.e. 96.08% and  Small business enterprises are 5,55,254 and Medium business enterprises are 52,539)
• As of July 1st 2023, Total no of jobs provided by MSMEs is 11,92,12,932
• Share of MSME Gross Value Added (GVA) in all India Gross Domestic Product (GDP) was 26.83% for the year 2020-21

These data points indicate the phenomenal contribution from MSMEs. Despite their contribution to Indian economy, MSMEs do negotiate many problems including inadequate access to ‘fast and easy financing’. But they can minimise these challenges by adapting to emerging technologies. The future of business is digital, and for Indian MSMEs, that future is NOW. Embracing these emerging technologies will not only allow them to overcome their challenges but also pave the way for a more robust, inclusive, and prosperous India.

Emerging Technologies & their benefits to MSMEs

1. India Stack:

India Stack are a set of APIs that allow governments, businesses, startups, and developers to utilize a unique digital Infrastructure. This digital infrastructure has many components, including Unified Payment Interface (UPI), Direct Benefit Transfer (DBT), and Data Empowerment and Protection Architecture (DEPA) / e-KYC.

Through UPI, MSMEs can perform real-time transactions seamlessly – UPI not only accelerates financial inclusion but also removes the need for carrying the cash around. With DBT, the government can ensure that benefits, loans or subsidies reach their beneficiaries directly — thus reducing leakages and corruption. DEPA / e-KYC provides a secure and efficient way for MSMEs to verify the identities of their customers, help in risk assessment and compliance.

2. Blockchain technologies : 

Emerging technologies like Blockchain, if adapted to & implemented, can bring transparency, trust, and efficiency to MSME operations. These allow a secure sharing of information, efficient tracking of goods, and automation of contractual obligations. They also help MSMEs counter fraud, speed up transactions, and cut costs. Several new financing frameworks, powered by blockchain, could automate contractual processes and obligations, and save time & reduce operational costs ,in the process.

3. Web 3.0  :

The shift from Web 2.5 to Web 3.0 also holds great potential for MSMEs. While Web 2.5 has enabled businesses to harness social media, e-commerce, and digital advertising, Web 3.0 promises a decentralized internet where users own their data. For MSMEs, this means a greater control over their digital assets and a higher potential for creating more personalized and secure customer experiences.

As we shift towards Web 3.0, MSMEs can use blockchain to retain control over their digital assets. They could, for example, create decentralized applications (dApps) that provide unique services without compromising on the data security. This shift could also allow MSMEs to participate in the decentralized finance (DeFi) space, providing them with new avenues for growth.

4. CBDC – Central bank Digital Currency   :

The cost of cash has been estimated to be between 0.5% of GDP (Gross Domestic Product) for countries such as Sweden to 1.7% of GDP for India. Digital and Cashless is the inevitable way to go for any sized economy and for all industries, especially for MSMEs. Furthermore the integration of CBDCs with India Stack could lead to a more reliable and efficient digital payment ecosystem. CBDCs could also provide a boost to the adoption of UPI, as more people start to trust and understand digital currencies.

5. Integrated Data models  :

Lastly, the implementation of actionable & integrated data models can empower MSMEs with powerful insights. These data models integrate data about organizations, people, and trade metadata to create a comprehensive view of the business environment. And they can help MSMEs

• identify opportunities
• streamline operations, and make more informed decisions

They could use trade metadata to identify new market trends, discover potential business partners, and predict customer behavior.

Finally, all these technologies could work together to create a resilient and dynamic business environment. For instance, blockchains could be programmed to execute transactions automatically once certain conditions are met, with the transaction details stored securely on the blockchain.

Imagine an MSME exploring cross-border trade opportunities. With the help of blockchains, they could quickly verify the credibility of overseas partners, track the movement of goods real-time, and ensure secure and transparent transactions. Smart contracts could automate the entire process, ensuring obligations are met in a timely and precise manner. CBDCs could facilitate easy cross-border transactions, eliminating the hassle of currency conversions and reducing transaction costs.

At the same time, innovative data models can provide MSMEs with a complete understanding of the global trade landscape. By analyzing organization, people, and trade metadata, MSMEs could identify potential markets, partners, and business opportunities, easily. They could also expect challenges and strategize accordingly, leading to better decision-making and increased competitiveness.

On this MSME Day, let’s appreciate the incredible potential of our MSMEs and support them in embracing these transformative technologies. After all, their success is our success, and their growth is India’s growth. Together, we can make the most of these technological advancements and pave the way for a brighter future.

References:

• Udyam Registration
• Central Bank Digital Currencies | Future of Value Transfer Deloitte
• Contribution of MSMEs and Cottage Industry to GDP

Credits : Sandeep Kunkunuru, ChatGPT and Google