5 Key Trends and Developments that MSMEs Cannot Ignore in 2023

Another year has ended, giving way to the fresh dawn of a new year. It is the time to refresh and recharge the energies to create a fruitful business year. Much like last year, 2023 is also anticipated to witness several major growth trends in the micro, small and medium enterprises (MSMEs) sector. These are critical to the shaping of further the growth strategy for the MSME sector in India, which is positioned to be the key to unlocking India's economic prosperity. Over the last two years, the pandemic created a minefield of challenges and provided opportunities to evolve, grow and emerge stronger. MSMEs broke old conventions, welcomed new trends, and adopted the latest technologies. They have started to understand the potential of digitisation and branding, which are constructing new avenues.

Prime Minister Narendra Modi stated on the occasion of the 75th anniversary of India's independence that 'Amrit Kaal' is the journey of new India for the next 25 years. It will be a period of national development and glory and an era when the country will play an important role in giving direction to the world. "It is just the beginning of the golden era," the PM reiterated on several occasions, adding that MSMEs will be a major driver of this growth as India moves toward becoming a $5 trillion economy. 2023 is expected to be a prolific year for MSMEs, and they can adopt certain trends to sky-high their business.

Some of the 2023 trends that MSMEs cannot ignore are:

1. Continued Digital Adoption

Digitalisation is the transition to using digital technologies to modify an existing business model and it can offer fresh prospects for generating revenue and value-producing opportunities. The COVID-19 pandemic facilitated a significant shift in the MSME ecosystem from the traditional approach to the digital medium. CRISIL reports that 53% of SMEs and 47% of micro-enterprises in India adopted digital sales platforms as against the pre-COVID figure of 29%.

MSMEs in various sectors can accelerate their digitalisation journey to improve efficiency, productivity, and skills. In 2023, this momentum will continue, with many businesses projected to adopt the digital model amidst the Government's Digital India mission. The Textile Sector and Gems & Jewellery sector are among the leading MSME sectors to embrace the 'big digital shift'. A survey by the Endurance International Group states that 50% of them incorporated technologies like WhatsApp and Video Conferencing tools for daily business operations.

Digital platforms like MSME Global Mart are also a part of digital transformation, where small businesses can sell their products anywhere in the world using e-commerce. These platforms drive MSMEs' growth and development at low costs, low investments, and high levels of innovation, which can help several companies to strengthen their brand and operations while helping local economies to prosper. However, many MSMEs are under-marketed and do not use technology optimally, so marketing education and technology education can be very useful for MSMEs. Hence, MSMEs are ramping up digital adoption to stay competitive and reach out to a wider customer base, keeping up with the changing times.

2. Formalisation of More MSMEs

Formalisation - or legal registration of businesses - can help unrecognised or uncategorised MSME businesses to become a recognised entity and therefore gain access to resources such as government schemes, business credits, and tax benefits. This initiative aided several MSME owners in taking their dream businesses to greater heights. However, according to a report from The Economic Times, 99.7% of MSMEs in India still operate informally and are unaware of the benefits they can receive. Therefore, the Ministry of MSME and the Government of India initiated the formalisation of MSME to assist this underserved sector of India.

2023 is expected to see the formalisation of more MSME businesses. New or existing informal MSMEs can register for 'Udyam Registration' to get all the benefits and various schemes offered by the Ministry of MSME. While addressing the FICCI's 95th Annual Convention & AGM, Mr B B Swain, Secretary of the Ministry of MSME, stated that the Indian MSME sector would get more formalised in the next 25 years to attract affordable credit. He also added that The 'Udyam' or 'MSME Registration' Portal, which crossed 1.31 crore MSMEs registered by 3rd January 2023, gets almost 20,000 new registrations daily".

Udyam Registration Portal is targeted to reach a 5 crore registration count in 2023, nearly 4x estimated growth in 12 months. This will open the gates to formal and affordable credit to registered MSMEs," Mr. Swain added. According to him, the Government is also working to connect every district of the country by setting up enterprise development and technology centres. He also stated that, with the slew of policy interventions, the MSME sector has the potential to become the largest employment-generating sector by 2035.

3. Increasing the Number of Exports from India

India's trade and external sector has a significant impact on the GDP growth and expansion in per capita income. India is among the world's largest producers of milk, pulses and jute and the second largest producer of rice, wheat, fruit and cotton, groundnut, sugar, and vegetables. It is also one of the leading producers of spices, fish, poultry, livestock and plantation crops. Most of these are run in small production units.

India's industrial exports are predicted to exceed $1 trillion by 2028. As India continues to be the world's fastest-growing major economy, one of the key drivers of growth for the country is the rise in the volume of India's exports, which have grown by 37% YoY in 2022. According to a report from the Ministry of Commerce & Industry, India's overall exports (Merchandise and Services combined) in April-November 2022 exhibited a positive growth of 17.72% over the same period last year.

Traditionally, MSMEs have contributed almost 50% of India's exports; therefore, an increase in exports signifies a growth opportunity for small businesses to scale up and distribute their products globally. By increasing exports, India is poised to provide more jobs and create opportunities for both semi-skilled and unskilled workers.

4. Reducing Dependency on Imports

MSMEs can contribute greatly towards reducing imports and enhancing exports. In 2023 and the coming years, the Government is on a mission to implement Make in India more actively to reduce importing goods and products from foreign countries. The Make in India programme aims at utilising the existing Indian talent base, creating additional employment opportunities and empowering the secondary and tertiary sectors. The programme also aims at improving India's rank on the Ease of Doing Business index by eliminating unnecessary laws and regulations. It also makes the bureaucratic processes easier, making the Government more transparent, responsive and accountable.

According to a report from the Ministry of Commerce and Industry, domestic demand has remained steady amidst the global downturn. Overall imports in April-November 2022 exhibited a growth of 29.47% over the same period last year. This signifies that India still depends on imports for various needs like raw materials, financing, machinery, etc. To reduce imports further, India needs to ramp up production in the country, which requires the Government to take measures to check the increase in raw material prices and high dependency on imports for some industries like pharma, etc. Moreover, the pandemic and the war in Ukraine showed us that there is a need for self-sufficiency regarding raw materials because supply chains for imports can break down due to geopolitical events. Through Atmanirbhar Bharat, the government aims to reduce imports and increase exports. By complementing the Make in India Scheme, MSMEs are encouraged to build capabilities and access domestic markets.
The Government of India has initiated several schemes to help MSMEs increase production in India to decrease foreign imports. One of them is the Raising and Accelerating MSME Performance (RAMP) scheme to strengthen India's MSME sector. The program aims to promote a larger formalisation in the MSME sector and improve capacity building, practices and processes, handholding, skill development, quality enrichment, technological upgradation, digitisation, outreach and marketing promotion. With the effective utilisation of proposed schemes, the micro and small entrepreneurship ecosystem in India is set to reach new heights.

5. Increased Consumer Demand in India

Consumer demand depends on buying power, representing an individual or household's ability to make purchases. It's all about the consumer's behaviour on how much money they'll put back into the economy when spending on shopping, restaurants, amusement parks, etc. If prices decline, consumers have greater buying power, whereas when inflation occurs, prices of goods and services go up, and consumers have less buying power. Consumer demand will continue to drive India's growth story in 2023. A report from Fitch Solutions states that consumer spending in India will experience solid growth over 2023 with buying power of household expected to grow by 7.1% in 2023 compared year on year to 2022.

The MSMEs are widening their domain across sectors of the economy, producing a diverse range of products and services to meet the consumer demands of domestic as well as global markets. As a result of this, a lot of new MSME businesses are flourishing in India. Hence, increased domestic consumption is a tremendous opportunity for MSMEs to grow and produce more domestic products to scale and meet the domestic demand across all sectors.

Particularly, the Indian Appliances and Consumer Electronics Industries are expected to see a marked increase in consumer demand by 2025. According to a report from IBEF, India's smart TV market grew by 74% YoY in the second quarter of 2022. The Indian automotive market is also expected to grow at a compound annual growth rate of 11.3% to reach 6,920,991 units by 2027. The Indian food processing market size reached INR 25,455 Billion in 2022. Looking forward, the market is expected to reach INR 45,345 Billion by 2028, exhibiting a growth rate (CAGR) of 9.5% during 2023-2028, as per a report from IMARC Group.

Conclusion

MSMEs remain one of the fastest-growing and most important pillars of the Indian economy. Hence, the Government is trying to create a holistic and conducive ecosystem that can enable MSMEs to grow further in 2023. As can be seen, 2023 is shaping up to be a fantastic year for every business sector. Small businesses are changing the way they work and interact with their audiences to make the most out of their investments while setting trends along the way. With technological advancements and catering to high consumer demands, MSMEs can grow their business effectively. Despite the extreme competition, recession, and inflation, emerging technologies are helping entrepreneurs worldwide to stand out in the crowd. MSME entrepreneurs can embrace the industry's changing landscape and explore more opportunities to advance their businesses.

The Ministry of MSME envisions a progressive MSME sector by promoting growth and development of the Sector through formalisation and providing support to existing enterprises, adopting cutting-edge technologies and encouraging the creation of new enterprises. MSMEs can avail of various schemes or benefits aimed at financial assistance, technology upgradation and assistance, infrastructure development, skill development and training, enhancing competitiveness and market assistance of MSMEs. The tech adoption and increasing raw material prices both of which require MSMEs to invest more in the businesses. Also, the need to ramp up domestic production to meet the increasing market demand and economic growth plans ($5 trillion), leads MSMEs to enhance their production.

Upgrading a business is not at all possible without sufficient capital. Hence, a business loan can come in handy in meeting such immediate or planned expenses. Small Businesses looking for digital lending solutions to streamline their operations can easily apply for unsecured business loans from Kinara Capital, a leading last-mile lending fintech in India. MSME entrepreneurs can avail of a collateral-free business loan from ₹1 lakh - ₹30 lakhs with doorstep service and communicate in their preferred vernacular language. Kinara helped thousands of MSMEs access credit with minimal documentation within 24-hours. The digital process of myKinara App enables MSMEs to check their eligibility in just 1-minute or you can give a Missed Call to 080-68264454 to talk to a Kinara Capital representative.

About Kinara Capital
Kinara Capital is a fast-growing fintech propelling financial inclusion of small business owners in India. Led by a women-majority management team, Kinara Capital is globally recognized for its innovations in MSME financial inclusion. Headquartered in Bengaluru, Kinara Capital operates 125 branches across 90+ cities in India. Visit us at www.kinaracapital.com for more information and follow us on Twitter @KinaraCapital

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This release was published on openPR.