MSME sector expected to drive growth of Indian economy

23 August 2023 2 min. read
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With the Indian economy projected to grow 8% from $3.6 trillion in 2023 to $4.9 trillion in 2027, micro, small, and medium Enterprises (MSMEs) are likely to be a major engine of that growth.

In part thanks to initiatives from the Indian government that have worked to stimulate manufacturing and digital platforms, MSMEs are expected to contribute 35% to 40% of India’s total GDP by 2027. In just retail, these smaller businesses could account for up to 75% of the sector’s $1.4 trillion in value.

This projection comes from a recent report by consulting firm Redseer, which uncovered the huge potential of the not-so-huge companies that drive India’s economy – MSMEs – and how they are embracing digital transformation.

India’s massive MSME opportunity

“MSMEs in India are seizing the digital opportunity, with a surge in online sales. By 2027, it’s anticipated that 70% of MSMEs will have adopted e-payments, and 5.5 to 6 million sellers (up from 1.5 to 2.5 million currently) are expected to sell online, resulting in over 35 million additional jobs. Online selling has proven highly profitable for MSMEs, with net profits increasing by over 15% for 55% of sellers,” said Mohit Rana, partner at Redseer.

Internet penetration in India is currently around 43% – quite low when compared with China at 70% and the US with over 90%. By 2027, about 80% of India is expected to have access to the internet, which is expected to in turn lead to an increase in e-payments and online sales for MSMEs.

Thus, MSMEs are expected to drive USD 50 Bn Of Etailing Sales By FY 2027

“The emergence of e-commerce platforms has unlocked new avenues for MSMEs, allowing them to tap into a global consumer base,” said Rana.

The report further adds that, by adopting online distribution and sales channels, MSMEs are capitalizing on the benefits of increased revenues, better customer understanding, and reduced costs.

previous report found that India’s digital payment sector could more than triple by 2026 to reach $10 trillion, with expanding merchant acceptance, digitalization of value chains, and new financial services marketplaces all contributing to that growth.