Why are MSMEs Still Unable to Access Newer Markets? Roughly 70 per cent of MSMEs continue to prefer conventional methods of customer engagement, while only 13 per cent have adopted social media-based digital marketing

Despite contributing nearly 30 per cent to India's GDP and employing over 110 million people, the Indian MSME (Micro, Small and Medium Enterprises) sector remains burdened by long-standing barriers to growth; foremost among them, the inability to effectively access broader markets. A recent report by the Small Industries Development Bank of India (SIDBI), paints a comprehensive picture of this struggle.

While access to credit continues to dominate policy discussions, the report finds that a significant pain point lies in MSMEs' limited ability to sell beyond their local markets. The majority of Indian MSMEs still rely on word-of-mouth, traditional sales channels, and offline marketing methods. Roughly 70 per cent of MSMEs continue to prefer conventional methods of customer engagement, while only 13 per cent have adopted social media-based digital marketing. This deep-rooted reliance on outdated modes of outreach is stalling their growth and hindering scalability.

Shwetank Dixit, chief growth officer, Justdial, underlines the real bottleneck stating, "The biggest hurdle for most MSMEs isn't lack of ambition—it is lack of visibility. Many still rely on word-of-mouth or local footfall, while modern digital channels often feel complex, intimidating, or expensive." He notes that digital solutions in India often fail to reflect the realities of small business owners, missing key factors like language preferences, ease of use, and relevance to local markets. "That's where the friction begins," he adds.

The challenge is particularly acute in non-metro and remote regions, where digital literacy is low and infrastructural gaps widen the digital divide. The report affirms that most MSMEs haven't yet integrated modern marketing or digital commerce into their operations. This lack of adoption not only curtails their visibility but also isolates them from fast-growing online markets.

However, when digital adoption is demystified and made accessible, the response is swift. As Dixit explains, "We have seen that when MSMEs are shown how easy it is to get discovered online—often for free or at a nominal charge—they don't hesitate." With mobile-first, intuitive tools that integrate seamlessly into daily business routines, the transformation is not just possible, it's immediate. "The key is simplicity, trust, and proof of ROI," he emphasizes.

The government has also stepped in to support digital expansion. Initiatives like the Open Network for Digital Commerce (ONDC) and Government e-Marketplace (GeM) are enabling MSMEs to establish a digital footprint. ONDC surpassed 5 lakh sellers by May 2024, with 70 per cent being small and medium enterprises. GeM mandates 25 per cent annual procurement from MSEs by central ministries and public sector enterprises, including specific quotas for women and SC/ST entrepreneurs. These efforts are gradually lowering barriers to market entry, reducing customer acquisition costs, and improving profitability.

Digital transformation could serve as another helping-hand. Anand Lakshmanan, head of Logitech for business, India, highlights, "Digital enablement is not a luxury but a necessity for businesses of all sizes in today's economy." According to him, scalable and cost-effective collaboration tools, especially for customer engagement and virtual interactions, can significantly enhance an MSME's ability to compete and grow. "Whether it's enhancing virtual customer interactions or empowering distributed teams, modern video conferencing solutions and digital collaboration tools are vital," he says.

The export sector tells a story of both progress and untapped potential. While India's merchandise exports dipped slightly from ~$451 billion in FY2023 to ~$437 billion in FY2024, MSMEs increased their share of these exports from 43.59 per cent to 45.73 per cent. Among those surveyed, 14 per cent of MSMEs were export-oriented. Exporters face their own set of challenges like stringent quality requirements, limited access to export finance, and gaps in transportation and regulatory knowledge. However, they also tend to be better equipped technologically.

Notably, exporters report fewer issues with digital adoption, reflecting the necessity of tech-driven processes in reaching global markets. However, they struggle more with sourcing high-quality raw materials that meet international standards. The contrast between exporters and non-exporters further illustrates how digital maturity can reduce operational friction and open new doors.

As per a report by CareEdge Ratings, post the Free Trade Agreement (FTA) between India and the United Kingdom, India could double its share in the UK's readymade garments (RMG) market from 6 per cent to 12 per cent in the near to medium term. This shift could provide an incremental annual export opportunity worth $1.1 to $1.2 billion, where MSMEs could unlock new regions to expand their business. Read more