17/04/2021 - Indian Economy | Mainstorming

IAS Parliament 4 years

KEY POINTS

· Small and medium-sized enterprises (SMEs) in India contribute a third to the national GDP, comprise almost half of exports, and employ a fifth of the country’s workforce.

· Many SMEs are unbanked and outside the realm of the formal economy, making distribution of monetary benefits and access to capital a challenge.

· The slow pace of digital adoption is a key reason why Indian SMEs have underperformed relative to their potential.

· Digitally-enabled SMEs can grow profits up to two times faster than offline SMEs, according to a study by KPMG and Google.

· They can also employ more people, grow their customer base, and expand into international markets with more ease.

· SMEs that go digital will be better prepared to deal with changing consumer behaviour triggered by events like the current pandemic and recession as they will be able to continue to service customers as well as ensure supply chain integrity and even expand their area of service.

· Day-to-day sales data can be analysed to determine a business owner’s credit score in seconds, using big data analytics, artificial intelligence (AI) and machine learning (ML) algorithms.

· By collecting and analysing alternative data that is not typically used in credit decisioning, more loans can be offered, underwriting processes can be improved, and overall risk can be reduced.

· Based on the India Stack model of digital authentication and cashless payments, shared infrastructure could help SMEs leapfrog to newer technologies to access credit in emergencies.

· Digital solutions like these could help limit the exposure of last-mile farmers, traders and other microentrepreneurs across the country, to ever-increasing shocks to the global economy.

· There will be a culture of innovation in the country enabling more ‘Made in India’ solutions to be exported to the world and realising the vision of taking small business contribution to exports to a whopping 75%.