Sector-Wise Growth of Small and Medium-Sized Businesses in India

23/06/2021

The recent onset of the financial crisis caused by the COVID-19 pandemic has heavily impacted the global economy. This has made it increasingly difficult for business enterprises to revive operations and achieve growth. Despite the same, India’s GDP for the upcoming financial year is projected at 7.43%, with India competing with Japan to become the third largest GDP in the world. One of the key drivers behind this growth is the small and medium-sized business (SMB) sector, especially the digitally-enabled small and medium enterprises. SMB analysis suggests that the sector has current fixed assets of ₹1,471,912.94 crore. It contributes 49% of the total market share, 40% of total exports, 16% of total bank lending, and provides employment to a 120 million-strong workforce.

India had the fastest growing online retail market in 2019, with the number of digital buyers across the country estimated to be approximately 330 million in 2020. India currently stands as the second largest online market with around 560 million users across the world. This number is expected to increase to over 660 million by 2023. Research suggests about 71% of Indian internet users have purchased products online from 2014 to 2020, meaning one in every three Indians engage in online shopping.

Sector-Wise Growth of Small and Medium-Sized Businesses in India

Salient Reasons for the Growth of Digital SMBs

Government data suggests that the number of registered MSMEs has increased by 18.49 % to 25.13 lakh units in 2020, up from 21.21 lakh in the financial year 2019. Here are few of reasons for this growth and upward trend of buying online:

Easy access to cheap internet that has increased internet penetration rates.
Use of personalized digital marketing in e-commerce by sellers to target customers, boosting online sales.
Attractive discounts, offers, and deals provided by online sellers on e-commerce platforms that ensure good value-for-money and encourage people to buy more online.
Quick and easy returns of ordered products that serve as an assurance to buyers.
Increase in popularity and usage of smartphones because of their easy availability at low prices. Smartphones are a leading medium of online purchases.
Preference of purchasing from the comfort of home instead of heading out to physical stores.
Availability of a wider range of products and varieties.
Social distancing norms and fear of contamination at physical stores during the current pandemic.
Reviews by other buyers help customers in making a more informed choice.
A rapid shift of a large number of SMBs to online platforms because of the business benefits they provide compared to physical stores.
The Digital India initiative, launched by the Government of India, has boosted growth of digital SMBs.
Steady inflow of private equity, venture capital, and MSME loans, coupled with tax and investment benefits, have generated a swift growth of online SMBs.
Demonetization of selected currency notes by the government in 2016 encouraged people to use digital payment solutions, which in turn made online buying easier and more popular.

Reasons for this growth and upward trend of buying online

Leading SMB Sectors

Based on SMB trends, the following are the three most profitable industry segments for SMBs:

Beauty and Wellness: The Indian beauty and wellness segment is growing rapidly and now has a net worth of $8 billion, making it one of most profitable business segments in India. The sector dominates both online and offline marketplaces because of increased awareness among users about their appearances and well-being.
Food and Beverage: In 2020, the Food & Beverages industry in India is estimated to be worth ₹40,225.6 crore with an annual growth rate (CAGR 2020-2024) of 14.4%. This is expected to result in a projected market volume of ₹68,813.9 crores by 2024.The figures clearly suggest the profits this sector can bring to businesses.
MedTech: The MedTech (medical technology) segment is another such leading sector that can bring in huge profits owing to its market share of $2.3 billion. The pandemic has worked as a catalyst to boost this sector, making it a popular choice among sellers and upstart SMBs.

Based on SMB trends, the following are the three industry segments that require least investment for SMBs:

Cleaning Agents and Hygiene Products: The pandemic has impressed the importance of hygiene and proper cleanliness. It has boosted the sales of masks, sanitizers, disinfectants, PPEs, and other cleaning services and products. You can easily start your organization in this segment by investing small initially. Click here to know more.
Warehouse and Storage: With the number of upstart companies increasing rapidly, the demand for storage and warehouse solutions has also grown. You can start your company in this segment with programs, such as ‘I have Space’ by Amazon, and kick-start your venture with minimal upfront investment.
Online Stores on E-commerce Marketplaces: Leading e-commerce platforms provide a great scope for growth for minimal investment. Register yourself as a seller on reliable platforms, such as Amazon, and enjoy high-quality and seamless selling experience by using their wide customer reach and excellent services, such as Amazon Launchpad. Click here to know more about selling online.

Based on SMB trends, the following are the three industry segments that are least time consuming and most convenient for SMBs:

Content Marketing: With a significant rise in online stores, there has also been an increase in demand for marketing products and services on different platforms. This has made content marketing an ideal business to venture in.
Reselling on E-commerce Platforms: E-commerce platforms, such as Amazon, have made reselling very convenient and least time consuming. This has kick-started a lot of seller journeys with ease. You can sell anything from books to clothes to kitchenware and reach crores of customers instantly. Click here to know more.
Data Analysis: Data forms the backbone of all businesses. With basic training and experience, entrepreneurs have been starting their data analysis solutions businesses in the least time to provide insights to companies.

Conclusion

The SMB segment is growing rapidly in India and is offering a multitude of opportunities for existing and new entrepreneurs. With digital SMBs taking over the retail market, the future is full of fresh avenues to explore and new grounds to break.

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