Flourishing amidst a challenging environment, the Small and Medium Enterprises ( SMEs) of India experienced several highs and lows in the past few years. With the Indian economy expected to emerge as one of the leading economies in the world and likely to become a $5 trillion economy by 2025, major impetus is being given to strengthen the backbone of our economy – the SME sector. Comprehending the significance of the SME sector vis-a-vis lending numbers to the job market, contribution to GDP and fostering entrepreneurship and innovation, numerous initiatives by our current government have been the high points.

Important developments in 2015-2016
Working in tandem with the larger goal of pushing for economic growth, the implementation of many reforms made the SME/start-up space relatively bullish in 2016 but not necessarily elated. These include re-implementation of Public Procurement Policy, Pradhan Mantri MUDRA Yojana, Make in India, Startup India, and Skill India. Aimed at increasing growth of manufacturing sector by 12-14% per annum and increase its share of GDP to 25% by 2025, the government plans to make financial and technical support more accessible. Also, the announcement to implement GST Bill in 2017 is a landmark decision that will help solve long existing challenges prevalent in the current taxation system. For SMEs, GST bill will help eradicate indirect taxes, have more transparency of tax process, draw projections of production cost and gain easy access to new geographies for business expansion.

MSMEs as the driver of socio-economic development of the country is set to see certain trends, some upcoming and some established, that will play out in 2017, touted to be an interesting year. Those who will survive the trenches of moves like demonetisation are most likely to witness a smoother course ahead.

SME Trends in 2017
Rise of SME focused B2B ecommerce: The advent of advanced technology is opening newer channels for businesses across several sectors. This is particularly true for B2B ecommerce firms focused on the Indian SME sector. Hitherto overlooked, the presence of innovative technological platforms is bringing on board a rising number of small players including the neighbourhood kirana store. This is a win-win situation for all involved enabling smoother transactions, procurement of raw materials and industrial goods, and forging a better connection between established brands and small shop owners. With SMEs in India touted to be a $25.8 billion market for emerging technologies by 2020, the rise of B2B ecommerce is a trend that will certainly gain more momentum in 2017.

Amalgamation of ecommerce & mcommerce: Digital transformation is no longer a fancy term vis a vis Indian SME courtesy faster penetration of Internet. When this is coupled with extensive usage of smartphones which are becoming more and more affordable, Indian SMEs are experiencing simultaneous adoption of web as well as mobile based technology. As per an EY report, companies have enhanced their focus on mobility as against social, resulting in a change from Social-Mobility-Analytics & Cloud (S-M-A-C) to Mobility-Analytics-Cloud & Social (M-A-C-S).

M-A-C-S technologies are being readily adopted by second generation entrepreneurs eager to enhance their revenue by bringing in operational efficiency and transform customer experience. The Indian SME sector is likely to utilise a union of e-commerce and m-commerce as a perfect recipe for success in 2017.

Improving SME lending with growth in FinTech firms : A major constraint in the growth of the SME sector has been non-availability of easy finance. Not all small and medium enterprises find favor with traditional banks when it comes to lending courtesy lack of experience, absence of collaterals and infrastructure, poor financials, and small ticket size. Given their significant online presence, several modern fintech players are making it convenient for the SMEs to receive loans. The year 2017 will experience a surge in NBFCs with special focus on offering customised loan solutions on online platforms. Creating a disruption in the industry and for good, these alternative lending companies analyse credit worthiness of the sellers using analytics and other scanning metrics like their sales and fulfilment records and can disburse loans in less than 48 hours. As a matter of fact, some of the banks like Bank of Baroda is also partnering with new age Fintechs to expand their reach especially in the SME sector.

Government initiatives, a major boost: The MSME sector, acknowledged as the backbone of the India economy, is further expected to contribute significantly to India’s growing GDP. The sector will inevitably support India to improve nation’s financial inclusion and mitigate the urban rural divide. Also, it is expected that by 2020, India will have the largest job ready, youth population in the world and with favourable business ecosystem in the manufacturing sector it will not only generate employment of significant level but also become hot bed of entrepreneurial activities.

Our government realises the urgency for providing a fast paced growth to MSME sector and therefore, 2017 will further witness strengthening of current policies and introduction of new initiatives to improve the business environment for MSMEs. The most awaited reform in 2017 is implementation of GST bill. Implementation of GST Bill is expected to benefit MSMEs not only with simpler tax structure but also with aspects such as improved technology adoption in order to comply with GST system. The ‘One Nation, One tax’ approach will make India an open market helping SMEs explore new markets with no or low entry barriers and experience business expansion. Therefore, the upcoming GST bill is expected to revolutionize the Indian tax system and offer the SME sector an equal footing as compared to their bigger more established counterparts.

To conclude, 2017 is going to be a year of progressive changes in the Indian SME sector based on the above-mentioned trends. Several policy interventions along with technology and innovation will continue to play a pivotal role in creating a business-friendly atmosphere for the SMEs.

(By: R Narayan)

Source: The Economic Times