A recent report estimated e-commerce to reach about $300 billion with tremendous opportunities for growth of India’s micro, small and medium enterprises. Eminent speakers at a recent roundtable event organised by IIM Lucknow and the Government of Uttar Pradesh also suggested the same. All agreed that growth of MSMEs will be one of the most critical elements in achieving the ambitious goals of inclusive economic development.
MSME face issues related to market reach, financial resources and management, skills, technology though which are more pronounced for early-stage ventures and micro-entrepreneurs. Many of these challenges can be addressed or reduced significantly by leveraging the E-commerce platforms, which have emerged as strong force in last decade or so.
First, the e-commerce platforms have large and varied base of buyers providing a quicker and low cost access to the MSMEs. These platforms also have lower barriers to entry- enabling entrepreneurial and mature organizations both to reach potential customers with ease. They have also reduced the cost of business eliminating capital cost associated with physical infrastructure and logistical networks offline as well as technological infrastructure cost needed for establishing individual online presence. MSMEs can also obtain vital customer feedback to modify the product based on market demand. Further as the country is witnessing sharper growth in use of more digital payments modes, using the e-commerce platform can streamline the receivables by MSMEs through various digital payment modes.
Second, the digital infrastructure provided by online platforms has enabled entrepreneurship particularly rise of the businesses which are digital only or digital first. Many such platforms also providing training, skill development, and mentorship programs to empower entrepreneurs and enhance their business acumen. Third, leveraging e-commerce platforms bridges the urban-rural divide and bring diversity and inclusivity, it has positive social externalities apart from economic outcomes for governments. Opportunities available to rural artisans, craftsmen, and small-scale producers to showcase their products to a global audience thereby revitalizing traditional industries and preserving cultural heritage. Thus, ecommerce platform offers several elements that meet several goals of the Government. Not surprising then that Department for Promotion of Industry and Internal Trade (DPIIT) has also launched its ecommerce platform- Open Network for Digital Commerce (ONDC).
Given the win-win scenario it brings for all the stakeholders, ecommerce is well placed to spur the growth in MSMEs. That said, challenges of awareness, onboarding process and commission and trust remain among others. A collaborative approach to address that is needed. It includes all stakeholders, government, MSMEs, e-commerce platforms, academia among others. In a recent round table event organized by IIM Lucknow and Government of Uttar Pradesh eminent speakers suggested that e commerce platforms have the potential to usher in economic opportunities and encourage policies and activities that can enable inclusive growth for the MSMEs. By leveraging their collective expertise and resources, these stakeholders can create an ecosystem that nurtures the growth of MSMEs and supports aspiring entrepreneurs.
Prof. Kshitij Awasthi, Associate Professor, Centre for Public Policy, IIM Lucknow *Views expressed are personal and do not represent those of his employer