Citi India sees MSMEs’ contribution to Indian GDP only go up amidst Covid-19 induced challenges. MSMEs are expected to benefit from supply chain realignments taking place as US, European, Japanese, Australian, Korean, and Taiwanese companies look at diversifying their manufacturing base to India, coupled with increased digital adoption by Indian enterprises, says Tushar Vikram, Head of Commercial Banking, Citi India. Excerpts from the interview:

How has Covid-19 challenge impacted your business? Is there a change in strategy?

Most of our customers are choosing to see the ongoing scenario as an opportunity. These are innovative entrepreneurs who are pivoting their firms to meet the demands of the hour – for example, manufacturing PPEs, test kits, and increasing the manufacturing of specialty chemicals for big pharma. Our pre- and post-Covid-19 focus remains the same: to meet the requirements of our customers and provide global digital solutions. We are not shying away from providing all forms of funding solutions, including term loans and working capital support just because of the pandemic. In fact, we have proactively reached out to our clients and provided liquidity solutions.

So what has changed? Has the digital adoption intensity of Citi's Commercial Banking clients increased?

Today, 99 per cent of our clients use our online platform as against 96 per cent a year earlier. We also now see 99 per cent of payments done through digital mediums as against 96 per cent a year earlier. The biggest gainer has been trade flows - now at 85 per cent from 30 per cent a year earlier, because of our early push to take our clients digital.

What has helped you achieve this?

Everyone has focused on digitisation of payments. We as a bank focused quite early on digitisation of trade. India's trade is manual and paper intensive. So our trade digitisation has helped. Digitisation is core to the bank and when the pandemic hit, there was a big shift from manual to digital. We were already on the digitisation journey, but more customers adopted digital at this time. You must remember the early adopters were large corporates. Now MSMEs have overtaken adoption because of nimbleness, and their keenness for survival.

Do you see Indian MSME companies benefit from the emerging supply chain rebalancing taking place from China?

From multiple perspectives, we believe this is the right time to attract global corporates to invest in India. There is a marked interest by multinationals to diversify production to India or pursue a “+1 strategy”. This is a long-term shift that we see, based on India’s success as a global services supplier. Key advantages are labour cost, electricity availability, tax rates and digital infrastructure.

We are actively engaged with our large corporate clients across US, Europe, Singapore, Hong Kong, Taiwan, South Korea and China on their global strategies. We have done multiple roadshows, through which we have connected with 500 clients. We continue to see active interest among these companies to invest in India. A proactive government, demographic dividend, large domestic market, also position India as an attractive base. The government’s Atmanirbhar Bharat focus will also drive investments. Emerging and mid-market corporates will in turn benefit as they form a part of the supply chains.

Which sectors will benefit the most from this realignment over the next few years?

Over the next few years, supply chain rebalancing and domestic consumption will fuel growth. Pharma, chemicals, food processing , IT/ITes, textiles, consumer electronics will benefit. There are focused initiatives from the Government to support these sectors. In addition Indian firms are already part of the supply chain in these industries.

MSMEs are regarded as growth engines of the economy. Any recovery trends seen in any of the sectors?

Yes absolutely MSME is a growth engine. The sector accounts for 31 per cent of India's GDP and there is potential for further growth. In US, MSMEs contribute 44 per cent to GDP and in China it is contributes 60 per cent of GDP. I see the Indian contribution growing, hopefully to at least the US level, if not to the China level. In regards to sectoral trends, I see companies in auto, pharma, agri-chemicals and consumer goods showing recovery.

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