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Indian SMEs still fail to harness the power of Net

by Prasad Krishna last modified Jun 29, 2011 06:04 AM
In India, only about 81 million people have access to the net, as it needs a level of education and IT skills to operate a computer. This article by Satarupa Paul was published in the Sunday Guardian on 19 June 2011.
Indian SMEs still fail to harness the power of Net

Illustration: Rashmi Gupta

Last month, a study conducted by the McKinsey Global Institute (MGI), the economics research arm of consultant McKinsey and Co, evaluated the impact of the Internet on growth, jobs and prosperity in the G8 nations as well as in India, China, Brazil, South Korea and Sweden. The study mentioned that the Internet contributed 3.2 per cent of India's gross domestic product (GDP) in 2009.

Based on a survey of 4,800 small and medium businesses in the 13 countries, it concludes that the use of the Internet has led to a 10 per cent increase in their productivity as well as accelerated their growth and export by two times.

India, however, featured low on the indices that support the report. Anja Kovacs, Fellow at Centre for Internet and Society in Bangalore, tells Guardian20, "Firstly, the figures for private investment and public expenditure on the Internet are very low in India. This shows that the web is still the domain of the elite here. Secondly, almost half of the contribution of the Internet to India's GDP comes from trade balance (net export). This definitely cannot be the play of small and medium businesses as they still fare poorly in the trade market. So to say that the Internet has led to an increase in their productivity in India, which in turn has led to a significant growth in GDP, is not entirely true."

She explains by saying, in India only about 81 million people have access to the net, as it needs a level of education and IT skills to operate a computer. As most of the small and medium businesses in India are run by economically backward people with minimum or no education, accessing the Internet and running their own websites for their businesses remains a distant dream.

Such cynicism dies down when we consider the case of Tilonia.com. A website dedicated to the craftsmen from Tilonia in Rajasthan who produce clothes and accessories, decorative home furnishings, handmade paper products, metalwork, leather goods, etc, it is run by a US based NGO called Friends of Tilonia, Inc, which besides being a platform for showcasing the products by artisans, also acts as an e-commerce portal. It does business worth Rs 30 lakh on an average every year. For an organisation that falls under the Micro, Small and Medium Enterprises (MSMEs) category, such income is pretty impressive. Extrapolate this number to the estimated 26.1 million registered MSMEs in India and their contribution to the country's Gross Domestic Product (GDP) could become enormous, but in reality, it is not quite so.

Osama Manzar, Founder and Director of Digital Empowerment Foundation (DEF) in New Delhi, says, "Almost 70 per cent of the registered MSMEs in India are not online and not more than 20 per cent are using any kind of IT or IT-enabled services. We conducted a workshop with 200 MSMEs recently and 99 per cent of these didn't have a website."

DEF works towards bridging this digital divide and organises workshops within the various artisan pockets of India. Manzar says, "The Internet has still not reached the grassroots level in India. We have such internationally famous handicrafts and artwork created by artisans working in various small and medium businesses, but they don't garner the business which the Net can help them fetch."

To address this problem, DEF has launched an e-commerce website for Chanderi silk saris and products made by weavers in Madhya Pradesh. Also, their eMSME facility provides MSMEs with a cost effective web platform with unlimited web pages to help entrepreneurs create a virtual identity for wider reach.

On a larger scale, the Indian government has set up Internet kiosks, one for every panchayat, in the rural areas. About 95,000 of such Common Service Centres (CSCs) have been installed all over the country and are meant to ease billing, enquiry, tax payment and other services. "But for a majority of Indians, especially those in small and medium businesses in small towns, the easiest Internet access points are cyber cafes. Such kiosks, if operated punctually, could provide them with a whole range of possibilities for communication and business that their counterparts enjoy in other countries," concludes Kovacs.

Cross-posted from the Sunday Guardian. The original can be read here

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