Leveraging technology and innovation to address vulnerabilities of MSMEs in India

Abstract

The MSME sector in India is at the bottom of the Indian economy. The sector is a major contributor to the GDP of the country and also helps in generating foreign exchange through exports. The sector is also a source of employment for the country. Despite the above important contributions to the Indian economy, the sector is still facing problems in terms of access to finance, high competition, inefficiencies in operations, and the slow adoption of new technologies. This paper examines the role of technology and innovation in overcoming the challenges to the sustainability and competitiveness of MSMEs in India. New technologies such as digital payments, cloud computing, artificial intelligence (AI), and blockchain are revolutionising the operations of MSMEs. Digital payment systems such as UPI and fintech solutions have made access to finance easier. Cloud technology offers scalable and affordable infrastructure. AI tools and data analytics are empowering MSMEs with valuable information on market trends and consumer behaviour, thus enabling them to make informed business decisions. Blockchain technology also improves the transparency and security of supply chains by reducing the risks of fraud and creating trust among supply chain partners. This examines government interventions such as the Digital MSME Scheme and the MSME Databank, which are intended to facilitate the adoption of technology in the sector. Nevertheless, there are still some challenges that exist in the sector, such as low digital literacy and high costs of initial investment in technology, as well as data security. It will be important to address these challenges in order to develop a robust MSME ecosystem that will be able to withstand the fluctuations of the economy and compete favourably in the global economy. This paper is written based on case studies that demonstrate the transformative power of technology in the MSME sector.