The MSME sector is believed to be the lynchpin for the socio-economic development of the country. This segment also has the potential to lead India towards self sufficiency, all the major ancillary industries belong to this segment.
This segment is an appropriate platform for the entrepreneurship and self-employment drives of the Government. There are nearly 6.3 crore MSMEs registered in India and the YoY growth in 2020 was seen at 18.5%. This sector contributes nearly 29% to GDP through Domestic and also international trade, therefore can also be considered as a strategically important sector. The pandemic caused a serious setback to the sector but on the other hand MSMEs proved their mettle by supplying surgical equipment and masks very efficiently and effectively.
This sector has been in focus for quite some time with generous reforms in its place. In order to compete in the present-day markets technology will be an important factor and the Ministry of MSME is aware of it. The ministry has acquired new tools of Artificial Intelligence and Machine learning in order to address the issues and understand the needs and provide solutions for these industries.
It will enable the concerned authorities to know the emotions of the people involved with or dependent on the MSME sector on a real time basis, along with the data-driven insights that are easily comprehendible. AI can process data in many ways which are not possible with traditional tools of Information Management Systems (MIS).
The main hindrance in the path of this sector was high variable costs in offline expansion of business channels. The simple and elegant solution for this would be e-commerce. The CLCS-TUS initiative in order to subsidize technology enablement in MSMEs is expected to be a paradigm shifting step in 2021 amid the recovery from the pandemic. B2B e-commerce platforms are expected to be able to enable 60-80 per cent input reduction for MSMEs through digital business expansion.
An MSME enterprise in order to run efficiently and successfully would need to approach a broader market and therefore a B-2-B platform will be of great help as this would increase the reach of the firms. In order to optimize costs and efficient deployment of resources logistics and supply chain factors must be considered as in order to be efficient the firm needs to maintain a lean supply chain management.
Another important aspect which needs to be looked upon is the financing and working capital requirements, MSMEs scope and scale of operations is generally limited which may prove to be detrimental to its growth and also loss of opportunity, therefore reliable sources of funds are very much necessary for the seamless flow of operations. Analytics and Big data may be an appropriate solution for this, with the help of these tools Banks and credit institutions can very well gauge the capacity of the firm with its turnover, cash flow projections, identifying its bottlenecks etc. therefore, with the help of these tools finance institutions can make proper assessment and enable firms to obtain credit at fair rates.
The blog has been authored by Gaurav Garg, Head of Research at CapitalVia Global Research Limited.
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