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Micro, small, and medium enterprises (MSMEs) are projected to propel $50 billion in e-tail sales and create an additional 35 million jobs by FY2027, according to Redseer Strategy Consultants.
The Indian economy is poised to achieve a compound annual growth rate (CAGR) of 8 per cent a year, propelling it from $3.6 trillion in 2023 to $4.9 trillion in 2027, due to factors such as a youthful population, income ladder ascent aided by infrastructure investments, and a favourable regulatory environment. Moreover, this growth trajectory positions the country as one of the world’s fastest-growing economies.
The retail market in India is projected to burgeon to $1.4 trillion by 2027, and MSMEs are poised to account for an impressive 65–75 per cent of this market share.
While offline MSMEs face challenges such as intense competition and financial burdens, the adoption of online channels has emerged as a viable solution. The integration of e-commerce platforms has unlocked new avenues for MSMEs, allowing them to tap into a global consumer base.
GST changes
As India’s internet penetration reaches an anticipated 80 per cent by 2027, MSMEs are embracing e-payments and online sales channels. In fact, the number of MSMEs selling online is anticipated to increase from 1.5–2 million to 5.5–6 million by 2027.
Moreover, these base case estimates of the number of online sellers could potentially be at least 20–25 per cent higher once the suggested changes to the GST Act and Rules are implemented, which will allow e-commerce sellers supplying goods with a turnover of up to Rs 40 lakh per annum and services with a turnover of up to Rs 20 lakh per annum, but unregistered under the Central Goods and Services (CGST) Act, to make intrastate supplies.
The report also stated that, by adopting online distribution and sales channels, MSMEs are capitalising on the benefits of increased revenues, customer understanding, and reduced costs.
Growing share of online sales
Its survey of 250 non-grocery sellers further indicated that in the first year of these sellers’ operations on e-commerce platforms, online revenue accounted for one-third of total sales, but by the third year it exceeded 50 per cent; 96 per cent of the MSMEs surveyed across categories such as fashion, beauty, and personal care reported an increase in total net profit after implementing an online sales channel. Again, more than 55 per cent of the sellers across these categories, with a turnover of more than Rs 1 crore per annum, reported a net profit increase of more than 15 per cent.
“Online sales has helped me scale up significantly because of the higher female customers on the platform and has improved my profits with cheaper sourcing. Moreover, it has a strong seller support system, resolving my claims in a timely and in the most efficient manner,” noted a seller of women’s sarees on Meesho whose annual turnover is Rs 16 crore.
Redseer’s report predicts that MSMEs will drive an estimated $50 billion in e-tailing sales by FY 2027, outpacing the projected 25 per cent CAGR growth of e-tailing. This growth underscores MSMEs’ ability to effectively harness the potential of online platforms.
Fostering scalability
MSMEs contribute around 30 per cent of the nation’s GDP. These enterprises, spanning across sectors such as manufacturing, trade, services, and more, have become a cornerstone of India’s economic fabric. Initiatives like the China+1 policy have enabled MSMEs to emerge as original equipment manufacturers, fostering their scalability and efficiency.
“Additionally, digitisation has expedited payments and reduced costs, leading to the rapid growth of MSMEs compared to their larger counterparts. Our analysis projects that by 2027, MSMEs will contribute a significant 35–40 per cent to India’s economy,” says Mohit Rana, Partner, Redseer Strategy Consultants.
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