High Digital Adoption Fails To Offset Structural Constraints Impacting MSME Productivity: Deloitte Report

ENA MSME 2025-11-06 17:35:33 New Delhi, Nov 6 (KNN) Indias micro, small and medium enterprises (MSMEs) continue to grapple with long-standing structural barriers, particularly limited access to formal credit, even as their digital adoption remains a relative strength, Deloitte India said in a report released on Wednesday. MSMEs contribute nearly 30 percent to Indias GDP, account for 45 percent of exports and support livelihoods for over 240 million people. However, despite showing significantly higher digital readiness than peers in OECD economies, Indian MSMEs operate at just 18 percent of the productivity levels of large domestic enterprises — far below the 45 70 percent range observed in OECD countries. This productivity gap curtails their global competitiveness, the report noted. Deloitte India economist Rumki Majumdar said the MSME sector faces persistent challenges, including limited access to formal credit, outdated technology, regulatory hurdles and infrastructure constraints. The credit gap is estimated at Rs 30 lakh crore or about 24 percent of total demand. It is significantly higher for services (27 percent) and women-owned MSMEs (35 percent), with severe implications on their scaling opportunities and growth prospects, Majumdar said, reported PTI. These constraints are more acute in non-metro regions, where most MSMEs operate. According to Deloittes MSME challenge index, industries such as readymade garments face severe financing pressures due to thin margins and intense global competition. Meanwhile, segments like defence equipment, fabricated metal products and sanitaryware appear more resilient, supported by niche demand or government procurement, though they continue to struggle with delayed payments and a shortage of skilled labour. Sectors with high export exposure — including textiles and garments, auto components and machinery — remain vulnerable to ongoing global trade uncertainty and tariff fluctuations. Deloittes state-wise MSME ecosystem index identifies Maharashtra, Uttar Pradesh, Tamil Nadu and Karnataka as the most resilient hubs, supported by proactive policies, infrastructure expansion and digital adoption. These states have achieved higher formalisation, improved credit access and stronger market linkages. The report says this evolving ecosystem presents an opportunity for large domestic and multinational corporations to collaborate with state governments, technology providers and industry bodies to build shared infrastructure and help accelerate MSME productivity, particularly in tier-II and tier-III regions. Digital adoption remains a bright spot, with nearly 90 percent of MSMEs using digital payments — far surpassing the OECD average of about 42 percent — positioning them well for e-commerce and fintech-led growth. (KNN Bureau) 43994 https://knnindia.co.in/news/newsdetails/msme/high-digital-adoption-fails-to-offset-structural-constraints-impacting-msme-productivity-deloitte-report 2025-11-06 17:35:33 knnindia.co.in High Digital Adoption Fails To Offset Structural Constraints Impacting MSME Productivity: Deloitte Report