Indian MSMEs issues arising from historical challenges: IndiaMart COO – LSB

The primary problems plaguing Indian micro, small and medium enterprises (MSMEs) stem from historical challenges, such as inadequate and untimely credit, predominant use of cash transactions and inadequate record keeping, says Dinesh Gulati, Chief Operating Officer (COO), BW Businessworld. In an interview with IndiaMart.

Interestingly, a joint report by the Global Alliance for Mass Entrepreneurship (GAME), Dunn & Bradstreet and Omedia Network India also states that the problem is neither new nor the result of an epidemic. The proportion of MSME sales held as deferred accounts receivable was consistent and stable over the pre-pandemic years.

Although Covid-19 has exacerbated the problem, the numbers from the previous five years were no less alarming. Notably, an estimated 5.9 percent of the gross value added (GVA) in the Indian economy—Rs 10.7 lakh crore—is stuck in delayed payments from buyers to MSME suppliers, according to the report.

Indiamart’s Gulati added, “Collaboration between government and private sector organizations is also important in addressing credit facility issues. Online marketplaces can act as important intermediaries, integrating financial services and providing detailed information on MSMEs.” Parts Edited:

Indian MSMEs face various problems like high debt and delayed payments. How do you see the global demand for Indian SME products at present?

The primary problems plaguing MSMEs in India stem from historical challenges, compounded by inadequate and untimely credit, predominant use of cash transactions and inadequate record-keeping. Government initiatives like GSTN, e-way bill, MSME initiative Aadhaar and NPCI are enabling businesses manifold.

Cooperation between government and non-governmental organizations is also important in solving the problem of credit facilities. Online marketplaces can act as important intermediaries, integrating financial services and providing detailed information on MSMEs. Moreover, initiatives like OCEN and account aggregators will further enable businesses by facilitating various aspects of the credit value chain.

Fintech and bill discounting platforms are also capable of generating data such as cash flow, early payment behavior, payment frequency, etc. This data, in turn, enables banks and NBFCs to develop financial products and extend collateral-free low-risk loans.

One District One Product (ODOP) is another such export initiative to promote Indian products from small towns and artisans. More than 730 districts are being promoted as export hubs and export plans have been developed for identified products and services to support local exporters or manufacturers.

What support does Indiamart offer to sellers and how does your company see the future of small sellers on the platform?

Indiamart is committed to addressing the fundamental challenges faced by Indian MSMEs, focusing on the key areas of access to markets, technology and finance. Our focus is to enable MSMEs and empower them in their digital transformation journey.

For the 77 lakh suppliers within our ecosystem, we provide free listings, ensuring that businesses of all sizes and from every corner of the country get the online visibility they need. Our services for vendors include Online Visibility, Request for Quotation, Cloud Telephony, CRM Manager, Accounting Solutions, Business Enablement – SaaS and Logistics SaaS.

Conversely, we serve 18 crore shoppers where we offer value discovery across 56 industries and over 97,000 categories, which is a huge hurdle for small-town businesses in general.

Your company operates in a highly competitive eCommerce market. How do you ensure that company operations remain agile and responsive to market dynamics during the festive season?

Indiamart prides itself on maintaining a balanced market that represents over 56 industries, ensuring that no single industry dominates the platform. This diversity is a key strength that underpins our operational agility, particularly during periods of significant market dynamics and seasonality.

Through a large pool of historical data on user behavior, it helps us plan initiatives proactively rather than reactively. These insights provide a deeper understanding of seasons and festivals, allowing us to proactively plan for anticipated changes.

Our category teams work closely with industry, constantly enriching categories to facilitate demand discovery and fulfillment. For example, during harvest and sowing seasons, we observe growth in tractors, farm equipment, seeds and chemicals, while festive seasons like Diwali witness significant growth in categories such as idols, gift items, decorations, lighting, home and bedroom furniture. Home appliances and more.

During Covid-19, IndiaMart focused on health supply categories such as sanitization, hygiene, medical products and related raw materials such as face masks, sanitizer making machines and patient monitoring systems.

A report by ICRIER, MSMEs that are not integrated with ecommerce platforms may find it more challenging to access the market. What is your opinion on this matter?

Digital transformation gives businesses an edge in creating a reach for their products and services, developing marketing tools and analytics to sharpen their strategy, build competitiveness, increase trust and acquire online customers. Thanks to GST, e-way bill and ease of demonetisation, the pace of business formalization has taken a healthy pace.

Covid-19 has reinforced the need for businesses of all sizes and demographics to go online. Ease of Payments- UPI and other payment solutions reflect a 4x increase in UPI transaction volume. It is also known that more than 72 percent of MSME transactions are done online.

I think online commerce and conversation platforms have a huge potential for further growth. Ecommerce companies and online marketplaces need to evolve with the needs of MSMEs to be able to offer services that can make their digital transformation journey easier than ever.

While there are benefits for MSMEs from integrating with ecommerce platforms, it is important to recognize that for firms unable to join, technology may represent a threat to survival rather than an opportunity. Do you agree with this statement?

The statement emphasizes a critical reality for MSMEs regarding technology integration and its implications. While acknowledging the widespread awareness of digital platforms and tools, the key challenge is to facilitate a seamless transition for MSMEs to use technology to grow their businesses.

Instead of seeing technology as a threat to survival, it should be seen as an indispensable tool that offers considerable benefits. These benefits include increasing competitiveness, tapping into a larger customer base, accessing valuable customer data and buying behavior insights, establishing a digital presence that inspires trust, and optimizing various processes such as marketing, invoicing, logistics management and data management, and above all to do Very reasonable and affordable cost.

Understanding how users interact with technology is an important consideration. In Indiamart’s case, a significant shift from 60 to 80 percent of traffic coming from mobile devices highlights the evolving user behavior. Tailoring products for mobile users is essential, recognizing the limitations of small screens and the need for a user-friendly experience. Emphasis on providing a seamless user experience is paramount, as any delays or inconveniences can drive users away.

The role of technology extends beyond mere tools; This requires a deep understanding of user behavior, data usage, effective design and overall delivery of these components to bring value to all stakeholders. This comprehensive approach ensures that technology integration is not just a necessity but a strategic enabler for MSMEs.

Can you tell us what internal goals and strategies your company plans to adopt to drive growth in the future?

A key objective of our growth strategy is to enhance the adoption of the Indiamart platform by increasing the number of small, medium or large enterprises, buyers and suppliers. To further drive the benefits of the tech stack and enable SMEs, we plan to expand our reach and customer services by adding regional offices and teams, especially in non-metro cities.

Recognizing the important role of accounting, we acquired Busy and Livekeeping and invested in Affair and RealBook. These steps align with our long-term goal to solve various fintech-related issues for businesses be it tax, GST, credit-lending, inventory management, invoicing or distribution management.

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