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67% of Indian MSMEs show digital readiness, but gaps in skills and awareness remain: CMR study
67% of Indian MSMEs show digital readiness, but gaps in skills and awareness remain: CMR study

Indian Express

time25-06-2025

  • Business
  • Indian Express

67% of Indian MSMEs show digital readiness, but gaps in skills and awareness remain: CMR study

Two out of three Indian micro, small, and medium Enterprises (MSMEs) are digitally equipped with many of them utilising enterprise tools and emerging technologies like artificial intelligence (AI) to enhance operational efficiency, according to a new study by CyberMedia Research (CMR). But while digital adoption is on the rise, challenges related to trust and reliability are slowing the pace of transformation for many businesses. The pan-India study, which surveyed over 400 MSMEs across sectors like manufacturing, education, retail, and IT services, found that 43 per cent of MSMEs were proficient in tools like Enterprise Resource Planning (ERP) and cloud computing, and 23 per cent already using advanced technologies such as AI. Despite these gains, many MSMEs remain cautious. The biggest barriers to adoption among growing businesses include a 'lack of clarity on the value and relevance' of digital tools (84 per cent), concerns over data security (81 per cent), and a lack of advanced digital skills (56 per cent). As digital choices become increasingly complex, a growing number of MSMEs are turning to advisory platforms for support. The study found that 62 per cent of MSMEs actively seek digital advisory guidance, often through MSME-centric online communities, professional forums, and peer networks. One standout in the digital advisory space is Vi Business' #ReadyForNext (RFN) program, which emerged as India's most widely recognised MSME-focused advisory platform, acknowledged by 57 per cent of surveyed businesses. Among those who used the RFN platform, more than 80 per cent reported digital fluency across both core and advanced tools, pointing to the platform's role in supporting digital upskilling. Businesses engaging with the RFN initiative reported measurable benefits: 62 per cent experienced improved business connectivity, 37 per cent saw faster decision-making enabled by real-time insights, 33 per cent reported growth in market reach or revenue, and 33 per cent achieved greater operational efficiency. User sentiment was also positive, with 64 per cent of MSMEs expressing overall satisfaction with the platform's services and 65 per cent indicating they would recommend it to their peers. 'India's digital momentum is being reshaped by a growing base of MSMEs adopting technology to drive competitiveness and innovation,' said Prabhu Ram, Vice President, Industry Research Group, CMR, in a statement. 'While the signs of digital maturity are promising, there remains a sizable segment that faces persistent barriers – especially around awareness, skills and cybersecurity,' Ram added. Ram added that initiatives like #ReadyForNext are increasingly being acknowledged for their role in guiding digital transformation journeys, especially for businesses unsure of how to evaluate or adopt emerging technologies.

VCs love start-ups—But why are they turning away from MSMEs?
VCs love start-ups—But why are they turning away from MSMEs?

Economic Times

time20-06-2025

  • Business
  • Economic Times

VCs love start-ups—But why are they turning away from MSMEs?

ETtech In FY24, India's VC funding returned to around $13.7 billion, a 1.4 times surge from the levels of 2023. Entrepreneurs in India's micro, small and medium enterprises (MSME) sector have been facing significant hurdles in accessing capital from traditional banking and institutional sources, primarily due to stringent eligibility criteria, high collateral demands, and complex application procedures. As a result, angel investors and venture capitalists (VCs) have emerged as key alternative options for the sector to address the funding gap. However, the penetration of angel investment and venture capital funds in MSMEs here lags global standards. According to experts and industry players, India's angel investment and venture capital ecosystem is still in its early stages, trailing global benchmarks in size, scope, and maturity. In 2024, less than 5% of India's 63 million MSMEs received equity funding, as per a report by the MSME Ministry. MSMEs in the country, particularly those in manufacturing and services, have been struggling with challenges such as low scalability, low digital penetration, and high-risk perception. With limited access to institutional capital, they primarily depend on self-financing or bank credit to overcome these Mittal, Founder & MD of Chandpur Paper, says India's MSMEs receive very little angel and venture capital finance, while technology-oriented start-ups get most of the FY24, India's VC funding returned to around $13.7 billion, a 1.4 times surge from the levels of 2023, as investors regained confidence and investments in the technology sector saw a jump, according to a report by global consultancy Bain & Company released earlier this year. Angel investments contributed $500-700 million during this period, but less than 10% went to traditional MSMEs. This highlights a significant funding gap for non-tech businesses. Echoing Mittal's view, Pushkar Mukewar, CEO & Co-founder of Drip Capital, says the Indian MSMEs face several challenges when seeking institutional or equity capital, including limited financial documentation, lack of formal credit history, low investor awareness about non-tech MSME sectors, and geographical disadvantages. 'Traditional VC or angel investors often see MSMEs as high-risk and low-return due to their fragmented and informal operations.'How the things can get better Jaydeep Birje, CEO of Leo Engineers, also believes that the government's efforts via Startup India, the SIDBI Fund of Funds, and the Credit Guarantee Scheme are slowly pushing the needle.'Some early-stage investors are also now expanding their scope beyond tech to more inclusive, impact-oriented MSMEs,' says emphasises that many MSMEs lack awareness and preparedness for equity funding. To boost access to funding, India needs to foster co-investment models, incentivise MSME-centric investors and develop digital matchmaking platforms. 'Mentorship and outreach in tier II and tier III cities can improve investor readiness. A focused ecosystem approach is essential to channel meaningful capital into this underfunded yet vital sector,' adds Singh, Founder & CEO of Quest OntheFRONTIER, notes that the landscape is evolving, and changes are already underway.'In 2025, angel investing in India is more structured and accessible than ever, driven by government initiatives like Startup India and the abolition of the Angel Tax (effective April 2025),' says Singh.A section of experts say that investors are now focusing on MSMEs with strong digital foundations, including robust online presence, e-commerce capabilities and technology adoption. This shift is driven by the recognition that digitally mature MSMEs are better positioned to scale and attract further funding. Additionally, the growth of angel networks and platforms has increased access to investors for MSMEs, including those in tier II and tier III cities, experts add. 'Multiple government schemes, such as the Startup India Seed Fund, MUDRA loans, and the Credit Guarantee Fund (CGTMSE), aim to provide MSMEs with access to capital, mentorship, and regulatory relief. The government is also encouraging sector-specific funds and Alternative Investment Fund (AIF) capital deployment into non-tech MSMEs. Exit pathways for VCs have improved, with streamlined M&A approvals and enhanced IPO regulations, increasing liquidity and making it more attractive for investors,' says Singh. According to Arvind Singh, India's MSMEs are poised for better access to angel and venture capital funding in 2025, driven by policy reforms, a thriving investor ecosystem and digital and technological readiness. While challenges remain—especially for non-tech MSMEs and those outside major urban centres—the overall trajectory is strongly positive, he Mukewar highlights that non-dilutive financing models are gaining popularity as a means to address the funding gap for MSMEs; options such as supply chain finance, invoice discounting, cash-flow-based lending, and marketplace seller financing are emerging as scalable solutions. 'These models leverage transaction data rather than collateral or credit history, making capital more accessible and relevant for MSMEs focused on exports, trade, or e-commerce. Scaling such fintech-driven models with supportive regulation and wider adoption can unlock meaningful capital access for India's MSMEs,' adds believes there is a need to increase awareness and improve access for MSMEs to various financing options. 'Some countries, like Singapore, set up MSME support centres in the industrial clusters. Second, the government should encourage and incentivise/subsidise the MSMEs to go digital and automate their business processes, leading to the formalisation of their financial operations and also improving productivity,' says suggests that finance providers, including banks and NBFCs, should leverage digital platforms and data-driven credit assessment tools and reach tier II and tier III cities and rural areas, thereby expanding funding access to MSMEs in underserved regions. This integrated approach can enhance efficiency, fairness, and inclusivity in MSME financing, says Singh.

Uttar Pradesh targets 15 new industrial zones to push MSME growth
Uttar Pradesh targets 15 new industrial zones to push MSME growth

Business Standard

time16-06-2025

  • Business
  • Business Standard

Uttar Pradesh targets 15 new industrial zones to push MSME growth

In total, 15 new MSME-centric industrial zones will be developed in 11 districts, including Aligarh, Firozabad, Kanpur Dehat, Prayagraj, Mirzapur, Lalitpur, Rae Bareli, among others Virendra Singh Rawat Lucknow Listen to This Article To boost its $1-trillion economy goal, Uttar Pradesh has planned to develop new micro, small, and medium enterprises (MSMEs) estates across 765 acres. The proposed industrial zones are aligned with the target of achieving MSME exports worth more than ₹3 trillion over the next two to three years. In total, 15 new MSME-centric industrial zones will be developed in 11 districts, including Aligarh, Firozabad, Kanpur Dehat, Prayagraj, Mirzapur, Lalitpur, Rae Bareli, among others. 'We have already identified land in 11 districts for developing 15 MSME industrial estates to boost manufacturing and create local job opportunities,' a senior official said.

‘For poor, populous states like Bihar, MSMEs key to job creation': N K Singh
‘For poor, populous states like Bihar, MSMEs key to job creation': N K Singh

Indian Express

time05-05-2025

  • Business
  • Indian Express

‘For poor, populous states like Bihar, MSMEs key to job creation': N K Singh

In a recent report of its Development Committee, the World Bank laid out the global challenge of job creation, particularly in the developing world. Noting that 1.2 billion young people will reach working age in developing countries, the report said these economies may not be able to generate enough jobs for even 300 million. In an interview with The Indian Express, former Finance Commission chairman N K Singh said for India to bridge this employment gap, Micro, Small and Medium Enterprises (MSMEs) are crucial. Singh, a BJP member and former JD(U) Rajya Sabha MP, spoke about India's efforts to boost MSMEs, the challenges faced by the sector, and how poll-bound Bihar in particular could benefit from an MSME-centric model. Excerpts: * How do you view the World Bank jobs report? In the Indian context, I feel jobs and MSMEs are central to many of our quests – for adoption of technology, for increasing the use of digital stack on which we have developed a mastery, for harmonising the adoption of high technology with high-quality jobs, and to really integrate the very large informal, unorganised sector. We have roughly 63 million MSMEs – 99% of that is micro. (On April 1, the Centre revised the micro classification, which now involves an investment cap of Rs 2.5 crore and turnover cap of Rs 10 crore)… The bulk of these micro enterprises are in the informal sector and their formalisation is one of the big challenges. Currently, micro enterprises employ at least 150 million people, which is 40% of our labour force, and constitute 30% of India's GDP and 45% of our exports. So it is a very significant part of the economy. * What are some of the challenges facing MSMEs? The definition and the challenges of MSMEs have kept evolving… A Reserve Bank of India committee identified the credit gap for meeting the needs of this sector at Rs 25 lakh crore. Only 14% of India's MSMEs have access to formal credit – in China, it is 37%, and in the US, it is 50%. So part of the problem arises over whether you would give credit in an unsecured way. The Union Finance Ministry has taken a number of initiatives, including that up to Rs 10 lakh can be unsecured loans. MSMEs are an important focus both for Prime Minister Narendra Modi and the Finance Minister. There are, of course, several other issues. One is to have much greater registration on online portals. The other is the inclusion of higher benefits through unsecured loans, through revamping of the credit line guarantee scheme, (and) access to digital technology becoming mainstreamed in the procurement policies of the government. Another major factor here is the compliance culture. The PM's own concern was a committee under the Cabinet Secretary which will look into the issues of simplifying compliance – what may be called 'deregulating' government… MSMEs are hardly in a position to be burdened with the whole framework of intricate and complex regulation. Then, of course, the usual issues of infrastructure and marketing access. Forget about the global value-added chain, how do you integrate MSMEs with the Indian value-added chain, and tap the huge potential they have via exports? Compared to global averages of women's participation at an average of 23%, India's is much lower. So how do we get more women involved in the MSME programme?… How do we substantially improve the number of women entrepreneurs? * What is India doing to address these challenges? Some labour-intensive industries – toys, textiles, garments – can create millions of jobs… Among the best international examples is Kenya's M-Pesa, a mobile-phone based payments and micro-financing portal. Our technology stack – the Jan-Dhan (Yojana), Aadhaar and mobile trinity – is a very credible response. On the credit guarantee scheme (too), we have done very significantly, as well as with the Skill India Mission… We have the National Skill Development Corporation (NSDC) and a cluster-based employment drive, but we can significantly improve on that. For instance, Vietnam is a great example of building clusters… Hosiery is a very important cluster in Tamil Nadu 's Tiruppur, there are auto parts clusters in Punjab. When it comes to some of these initiatives, not only do we have to learn, but the world has a lot to learn from us. In terms of financing, I think the world perhaps has taught us much more. For instance, the South African example of blended finance – we have introduced it but we can do so much more in conjunction with the private sector. The World Bank report focusing on jobs is an area where we have done a lot but as we look to provide gainful employment, the MSME sector is a very important sector… particularly in respect of some very endemically poor and populous states, one of which is Bihar, where I come from. * Would an MSME-centric model work in Bihar? Bihar now has about 125 million people. Per capita income is only Rs 59,000. Poverty numbers are 33%, compared to a national average of 14%. Unemployment rate is 17%, far in excess of the national average. And it has huge migratory pressures. So Bihar has a great deal to benefit from MSMEs. As the (Assembly) elections approach, the issues of Bihar's developmental deficit, and how to overcome them would attract focus… * What sectors should an MSME-led model focus on in Bihar? One is a cluster-based approach where Bihar has a comparative advantage in terms of a fairly talented human resource. Second is harnessing the great latent potential of Bihar entrepreneurs, particularly women. To saturate the total credit needs and upgrade skills, the cluster-based approach would be best utilised in the tourism and service sectors, small and medium industries, along with better integration with large industries. New efforts have been made to develop Bihar's latent tourism potential through the Buddhist and other tourist circuits. North Bihar is full of these, what may be called 'soft power' hubs… The fact that the Finance Minister (Nirmala Sitharaman) for her Budget speech decided to wear a Madhubani saree shows the enormous artistic and cultural talent of Mithila and Bihar… People tend to forget that Tussar silk was a global quest before the colonial period destroyed the silk industry in Bhagalpur… A recent big announcement was the Makhana Board. Who would have realised that the makhana has this huge potential? This is only one example. * There is, however, a huge demand in Bihar for government jobs. Several initiatives can be undertaken. One is the initiative of effectively harnessing technology for upgrading education and educational pedagogy. A focus on its health parameters will in turn lead to better education for girls, which will further have a dramatic impact on Bihar's own GDP and per capita income as more women join the labour force. All of which would also bring down the migratory pressures from Bihar… These initiatives have commenced and hopefully will be deepened. * How do you view the performance of the JD(U)-BJP government in Bihar? I really believe it's best designed to suit Bihar's developmental needs.. Bihar needs a continuation of this constellation of policies, deepening this process further by continuing with a government that is stable, that guarantees security of life and property… That this government focuses on development and not identity politics, I think is the path forward… There is a very famous phrase that would be very applicable for Bihar – guaranteeing what is known as a 'peace dividend'. Parties that are designed to give a peace dividend are also likely to be better placed to give development. The current leadership of the BJP and Nitish Kumar is well designed for this.

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