For MSMEs, small isn’t always beautiful despite e-commerce boom

Representative Image Photographer: Dhiraj Singh/Bloomberg via Getty Images

Procedural bottlenecks, poor technology infrastructure, inadequate finance and regulatory barriers continue to scuttle Indian small enterprises, despite products getting listed on global platforms such as Amazon, eBay and Alibaba, a latest study has said.

“While global platforms like eBay, Amazon and Alibaba are engaging with MSMEs (micro, small and medium enterprises) to push their products in the global markets…discrepancies still pertain to various policy related issues required to provide a filip to MSME exports through e-commerce,” said a study jointly brought out by Indian Institute of Foreign Trade (IIFT) and industry body FICCI.

Hundreds of Indian SMEs’ products now are shipped across the world through global supply chains of transnational online and offline retail giants including Walmart.

There are about 52 million small, micro and medium enterprises in India. Put together, these contribute to half of India’s factory output, 45 percent of merchandise exports and employ nearly 120 million people.

Experts, however, said that India’s small firms remain caught in a low-scale, low-income trap, hemmed in by a host of factors including poor power availability, technological inadequacy and complex procedures.

“Low information, communication and technology (ICT) bandwidth, speed and reliability and power failure in rural areas” are the key factors hindering MSME’s growth, the study pointed out.

Rajveer Singh, Managing Director, Apex Cluster Development Services said that MSME sector underestimates itself as an online export-worthy supplier. High production and technology acquisition costs, financing and inventory-based issues plague the sector, leaving them inefficient to promote export through e-commerce platforms, Singh said.

Such issues need to be addressed to leverage the benefit out of the global market, he said.

“Lack of availability of skilled workers, privacy and security concerns and inaccessibility of finance are some of the roadblocks preventing Indian MSME’s transition to e-commerce avenues,” the IIFT-FICCI study titled Exploring Potential of E-Commerce for Retail Exports of Indian MSMEs in the Manufacturing Sector, said.

“India has a huge production potential,” said Tamanna Chaturvedi, Research Consultant at IIFT. “Even though B2C (business-to-commerce) e-commerce sales in India stood at USD 25.5 billion, ninth in the world, it constitutes less than one per cent of India’s total retail market”.

According to the study more than half (51 per cent) of MSMEs are unaware about existing government policies.