Digital Adoption Boosts Productivity And Formalisation In MSMEs: SBI Research

New Delhi, Jun 5 (KNN) Digital adoption is significantly improving productivity and accelerating formalisation among India's informal enterprises, according to a new SBI Research analysis based on the Annual Survey of Unincorporated Sector Enterprises (ASUSE) 2025.

The report, titled "Empowering Enterprises through Digitalisation and Formalisation", found that a one-unit increase in digital adoption is associated with nearly a 76 percent rise in labour productivity among unincorporated enterprises.

Digital Adoption Strongly Boosts Productivity 
Using an Information and Communication Technology (ICT) adoption index constructed from 21 digitalisation indicators, the study observed a strong relationship between technology usage, business productivity and formal registration.

According to the report, firm age and capital intensity also contribute positively to productivity, improving output per worker by around 11 percent and 7 percent, respectively, reported Business Standard.

Technology Plays Key Role In Formalisation 
The analysis further found that digitalisation plays a major role in enterprise formalisation. 

Higher ICT adoption increases the probability of business registration by about 84 percentage points on average, with the impact estimated at 64 percentage points in manufacturing, 82 percentage points in trade and 86 percentage points in services.

SBI Research noted that digital tools help reduce the costs of formalisation by improving access to digital payments, record-keeping systems and regulatory compliance processes. At the same time, formalisation enhances access to credit, markets and institutional support networks.

The report highlighted that enterprises registered under Udyam Assist, Udyam and GST frameworks demonstrate stronger formal business practices, including maintaining business accounts, audited records and online operations.

Formalisation Improves Access To Credit 
Formalisation was also found to improve access to finance. Registered enterprises are nearly 7 percentage points more likely to obtain formal credit, while businesses registered under Udyam or Udyam Assist receive loan amounts approximately 41 percent higher than other registered firms.

The study identified a continuing gender gap in access to finance, with women-led enterprises having a 2.44 percentage-point lower likelihood of obtaining formal credit than male-led firms. However, registration significantly improves credit access and loan availability for women entrepreneurs.

Policy Steps To Strengthen Digital Ecosystem 
To strengthen the benefits of digitalisation and formalisation, SBI Research recommended expanding affordable internet connectivity and digital payment infrastructure, providing digital training in local languages, promoting Udyam and GST registration drives.

They also recommended encouraging cash flow-based lending models alongside greater market access through e-commerce and government procurement platforms.

The report said these measures could help deepen financial inclusion and support sustainable growth among India's micro and small enterprises.

(KNN Bureau)