India at 75: How MSMEs are witnessing independence through e-commerce

The success of e-commerce in linking Bharat to India is one of the less told stories of India’s business ecosystem. Yet, this ongoing phenomenon is one of the very few to have linkages to multiple government initiatives rolled out over the last eight years – Digital India, Skill India, StartUp India, Make in India, JAM (Jan Dhan, Aadhar and mobile), and others.  

Only some years ago, few would have imagined that the stack would develop so beautifully – India today has the second highest number of mobile users in the world; online content is now available in not just English and Hindi but many other State languages, thus removing language barriers; the usage of smartphones has increased exponentially; mobile connectivity is getting better every day, and a robust digital payments ecosystem has developed to the extent that it is now the world’s envy.

Technological and financial developments aside, at the heart of this progress, is the trust that online marketplaces and e-commerce platforms have developed with micro, small and medium enterprises (MSMEs), which are the bridge connecting Bharat and India.

From budding fashion designers to homemakers showcasing their hand-made products, e-commerce has been a key growth driver for millions of aspiring entrepreneurs, helping them win their daily bread-and-butter and making a significant positive difference to their lives. Most new MSME sellers today come from Tier-2 and Tier-3 markets such as Agra, Panipat, Rajkot, and others, reflecting a willingness on both the seller side and the buyer side to improve their lives.

There have been significant efforts by e-commerce companies in establishing resilient and inclusive agri-supply chains. Many of them have sewn tie-ups with Farmer Producer Organizations (FPOs) to enable market access and support the livelihoods of local farming communities and the food processing industry, while enabling access to local staples of various regions. To enable this e-commerce companies are investing in training and capacity-building programs for FPOs, and small and marginal farmers. These training programs cover all aspects of quality produce - raw material supply, repackaging centers, verification of quality produce, buying strategy, purchase order, payment terms and conditions, and logistics.

In addition, investments in infrastructure like cold storage have reduced wastage, saved precious natural resources, and taken farmer produce to areas where such fruits and vegetables were not easily available. Farmers and cooperative bodies are now more sensitive to consumer demands and thus more adaptive to changing preferences while also being open to implementing best practices.

Linkages with artisans and producers of handicraft have also not only arrested the decline in local art and craft but revived many of them as the power of digital brings to locals a market that is willing to pay. Awareness about climate change and a desire to preserve local cultures and communities is now luring more consumers to such eco-friendly and organic products.

Empowering the bottom of the social pyramid through entrepreneurship and job creation

When it first started, about 15 years ago, e-commerce was merely looked upon as a platform to trade goods. To use cricket parlance, it was seen as a specialist batsman/bowler. With the comfort of hindsight, one can say today that e-commerce has instead proved to be an exceptional all-rounder with not just batting and bowling skills but also the ability to keep wickets. The breadth of the e-commerce bouquet includes a plethora of online services; job opportunities for men and women; a means to lead a financially independent life of respect and dignity; and the fulfillment of a wide range of hitherto unmet lifestyle, livelihood and transactional needs. Furthermore, it is feeding the appetite of aspirational Indians who want the best of everything delivered to their home. It is hardly surprising that the 2022 Global Payments Report by Worldpay from FIS projects that India’s e-commerce market could surpass the US in terms of transaction value by the year 2025.

One of the biggest contributions of e-commerce is the manner in which it has fuelled the entrepreneurial spirit of the average Indian. It was evident during the pandemic when thousands of units sprung up almost overnight to make hand sanitizers, hand-washes, masks, and other necessities that consumers were looking to buy in those troubled times. Presented with an opportunity but lacking the marketing skills and the financial muscle to capitalise on it, they turned to online marketplaces to showcase their offerings. For the hapless citizens, it was a boon how MSMEs swiftly reacted to the calamity with their own solutions, even as corporates, understandably, were taking time to respond. Some of these MSMEs went on to manufacture the products for the same companies later. The turnover of the government’s own marketplace – GeM, which enables online procurement of goods and services by government ministries and departments – topped Rs 1 trillion this financial year, the highest in a 12-month period since its launch in 2016. According to a tweet by Hon’ble Prime Minister Narendra Modi in March, more than half of the order value is coming from India’s MSMEs.

Easier cash flows at all times, and huge revenue boosts on special occasions

Traditionally, one of the major drawbacks of the MSME sector has been a lack of credit, locked capital, and high debtor days. As Mr. Jayant Sinha, Chairman of the Standing Committee on Finance in Parliament, wrote in a newspaper column recently, more than 60% of India’s 60-million-plus MSMEs are not borrowing from the financial sector, leading to a credit gap of Rs 20-25 trillion. It is well known that the informal system is both unreliable and prohibitive. E-commerce aims to address this issue.

Some of the leading e-commerce platforms now make payment to MSMEs within a day of the receipt of the order. They also facilitate cheaper, quicker credit to MSMEs through their lenders. This framework keeps the cash flow going for sellers. Many e-commerce platforms also conduct frequent training programmes to educate MSMEs on best practices for efficient and profitable business operations.

There is also the fact that the inclusion of MSMEs into the online fold is creating greater social harmony and increasing anticipation around festivals and events. Festivals like Diwali and Eid are among the biggest single-day revenue earners for many MSMEs, particularly those in small towns and cities.

The role of the MSMEs in a market like India cannot be emphasized enough; their presence is not only relevant but essential. With India celebrating 75 years of Independence, e-commerce is enabling more and more MSMEs to become independent in a different but equally important sense.

(Rajneesh Kumar is SVP and Chief Corporate Affairs Officer, Flipkart Group)