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1. Assisted Digitization: Part 2 - Impact on MSMEs In the first post I talked about unequal impact of digitization (or digital technologies) on different sections of consumers. I had emphasized that people living in rural areas need assistance to extract the benefits of digital technologies. Assistance that would help them bridge gap with digitally-savvy urban consumers who share the enormous benefits. Like rural consumers, the industry group of Micro, Small and Medium Enterprises (MSMEs) too need assistance to extract the benefits of digitization. The MSME sector has emerged as a highly vibrant and dynamic part of the Indian economy. It continues to play a crucial role by providing vast employment opportunities at comparatively lower capital cost as compared to large industries. The sector also helps in industrialization of rural and backward areas, thereby assuring more equitable distribution of national income and wealth. The MSME sector contributes around 37% of India’s Gross Domestic Product (GDP) and encompasses over fifty million companies and entrepreneurs accounting for a vast bouquet of products/services that address both domestic and export markets. When digital upsets the equilibrium Today, all businesses, large and small, are getting impacted by digital technologies and they cannot afford to ignore the sweeping change. The MSME sector too is struggling to make sense of the opportunities and challenges presented. This is in contrast to the confidence and ability of large enterprises that have the wherewithal to invest in the necessary infrastructure and get the best advice in the business. For example, organized retail (like Reliance Fresh, More, Heritage Fresh and others) and online e-commerce firms (Flipkart, Amazon etc.) have employed digital technologies to cut into the business of millions of kirana shops dotting the country, especially the rural markets. By themselves, MSMEs do not have the ability or the capacity to face the onslaught on their livelihoods. In short, this exciting and vast sector is essentially isolated from harvesting the benefits of digital technologies.

2. The fundamental problem MSMEs are either unable, or slow to adopt digital technologies, not because they do not want to. The problem arises because solutions are not specifically designed and built for this sector. Some of the main impediments include: · Lack of MSME-specific and cost-effective solutions · Lack of technology in-house skills and infrastructure · Lack of easy-to-use interfaces · Lack of financial capacity to invest in capital expenditure The assistance MSMEs need In the context of MSMEs, the need of the hour is assistance in the form of a ‘Total Solution’ to their problems. This can be largely accomplished by re-purposing the same digital technologies used by larger enterprises. This comprises hardware, software, applications, communication bandwidth, simple user interface, training, support, and ease of use –all in a box. This solution package needs to be offered at a very low, affordable and variable cost. Importantly, there should be no fixed capital costs. Assistance is here Fortunately, such assistance is coming from different sources in different forms. Both the Governments (center and state) are giving strong support to address the above problems. Industry associations and trade bodies are responding to some of the issues by reducing the friction that occurs on course of adopting digital technologies. Finally, a slew of new- generation companies and start-ups are working overtime to capture a big slice of the opportunity to provide digital solutions to MSMEs. The Government of India is giving high priority to the role of MSMEs in nation building by creating a separate department of MSME under a cabinet ranked minister. The department evangelizes the use of digital technologies through many initiatives for the sector and also coordinates with other departments and state Governments.

3. A case in point is the recent launch of an online portal and mobile MyMSME app to monitor different schemes promoted by the Government. The Government has also decided to implement “Digital MSME” scheme for the promotion of digital technologies by adopting Cloud computing. The objectives are to improve their competitiveness, business process standardization and productivity improvement – all through the Cloud platform, thus reducing the burden of investment. The roll out of Goods and Services Tax (GST) – the new tax regime driven by the Government of India is a good example. It has come up with a Government-to-Business (G2B) portal that acts as a comprehensive platform for taxpayers to conveniently interact with and access the GST System. The portal has opened its application programming interfaces (APIs) so that third party application developers can use them to develop new and innovative solutions for GST compliance and also integrate with existing applications like SAP, Tally and other. Some of these new applications help MSMEs in uploading invoices, information and filing returns as required by GST. Taxpayers can access the secure GST system via desktop, mobile and multiple applications. Recognizing the crucial need for assistance, the Government has introduced – GST Suvidha Provider or GSP. The Government’s endeavor is to build a vibrant GSP ecosystem and ensure its success by putting in place an open, transparent and participative framework for capable and motivated enterprises and entrepreneurs. Confederation of Indian Industry (CII), India’s premier industry association, has created an online business resource center called MyCII covering four critical aspects of business operation: · Business leads · Industry and regulatory information · Global and local networking · Latest industry research and knowledge

4. This platform has proved to be very valuable to MSMEs. NASSCOM, not-for-profit industry association representing Information Technology (IT) and Business Process Management (BPM) industry in India, initiated the E-Marketplace (under beta testing) specifically for their MSME members. This platform helps members with their marketing activities and generates leads from United States and Asia Pacific markets. Even private sector enterprises and new-age startups are offering assistance to MSMEs. For example, CoreLogs offers to help identify potential clients in the IT sector for products and services. Another StartUp, Power2SME is on a mission to empower SMEs and enhance their overall productivity and deliver measurable business value. The portal helps SMEs to focus on their core business of accelerating growth – both in terms of revenue and development. The challenge is in creating awareness, and then acceptance. This calls for an elaborate and broad-based plan to educate the target audience on the advantages of new digital technologies and their benefits. Smart MSMEs will do well for themselves if they latch on to opportunities provided by digitization with assistance coming from the government agencies, trade bodies and Start-Up ecosystem.