Micro, Small, and Medium Enterprises (MSMEs) drive economic growth by creating jobs and fostering innovation. To stay competitive, MSMEs must adopt modern technology, which enhances efficiency, improves product quality, and reduces costs.
As per research by FTCCI, it is found that only 20-25% of MSMEs have adopted modern global techniques, while 75-80% still rely on traditional methods.
Upgrading technology helps MSMEs improve energy efficiency, streamline operations, and expand their market reach, ensuring sustainable growth.
Why Technology Upgradation is Essential for MSMEs
Upgrading technology is crucial for MSMEs to stay competitive and sustainable. Modernization also reduces operational inefficiencies, compliance costs, and greenhouse gas emissions, supporting long-term growth and environmental sustainability.
Technology helps MSMEs work more efficiently, cut energy use, and reduce costs. This improves profits and helps them compete with bigger businesses. New technology also encourages innovation, helping MSMEs create better solutions and stay relevant.
Regular upgrades ensure compliance with laws and environmental rules, avoiding penalties or disruptions. Investing in technology isn’t just about keeping up—it secures long-term growth, allowing MSMEs to thrive, create jobs, and boost the economy.
The Benefits of Technology Upgradation for MSMEs
- Increased Productivity – A significant outcome of technology upgradation in small-scale companies is increased energy efficiency. The cost of energy, which is a substantial component of the cost structure of the manufacturing activity for MSMEs, which can be reduced by technology upgradation.
- Adoption of Renewable Energy Sources – Global warming is reduced via energy efficiency. More than 90% of all energy used today comes from fossil fuels. This entails the production of significant amounts of greenhouse gases (GHG), which change the global atmosphere. The introduction of various green initiatives by the Indian Government to implement and adopt renewable energy sources will encourage MSME entrepreneurs to invest in the grade of legacy technology to green tech solutions.
- Financial Inclusion – Digital payment solutions and fintech integration help MSMEs access credit, streamline transactions, and improve financial management.
- Reduce Production Costs – A significant decrease in production costs can be achieved through adoption and upgradation of new technology resulting in energy saving and efficient management.
- Improved Quality – Advanced machinery and automation enhance product consistency, reduce defects, and meet global standards.
- Better Customer Engagement – CRM tools and digital marketing boost customer interaction, loyalty, and sales.
- Regulatory Compliance – Technology simplifies tax filings, audits, and adherence to government regulations, reducing legal risks.
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Challenges Faced by MSMEs in Technology Upgradation
- High Investment Cost: While technology upgradation offers significant benefits, the upfront costs can be a major hurdle for MSMEs. Purchasing advanced machinery, upgrading software, and training employees require substantial capital. However, government schemes, subsidies, and collateral-free business loans, like those from Kinara Capital, can help MSMEs overcome financial barriers and invest in modernization.
- Lack of Technical Expertise: Many MSMEs struggle with adopting new technologies due to a lack of technical know-how. Limited access to skilled professionals and insufficient training can slow down digital transformation. To bridge this gap, MSMEs can leverage government-supported training programs, industry collaborations, and expert-led workshops to upskill their workforce and stay competitive.
- Resistance to Change: Many MSMEs hesitate to upgrade technology due to fear of disruption, unfamiliarity with new systems, or reluctance to invest time in learning. Employees and business owners may prefer traditional methods over automation. Overcoming this requires awareness programs, training, and demonstrating the long-term benefits of technology in improving efficiency and profitability.
- Integration Issues: Many MSMEs already use traditional systems, and transitioning to new technology often leads to integration challenges. Support in seamless migration and training can make the transition smoother.
How MSMEs Can Overcome Technology Adoption Barriers
- Spread Awareness – Organize workshops and training to help MSMEs understand the benefits of technology.
- Financial Support – Offer tax breaks, subsidies, and low-interest loans to make technology adoption easier.
- Skill Development – Partner with institutes to provide training and upskill workers.
- Better Infrastructure – Improve internet access, power supply, and facilities for MSMEs.
- Cybersecurity Measures – Educate businesses on online safety and offer affordable security solutions.
Government Support for MSME Technology and Quality Upgradation
Recognizing the importance of technology upgradation, the Government of India has introduced various schemes to assist MSMEs in adopting advanced processes. One such initiative is the Scheme for ‘Technology and Quality Upgradation (TEQUP) Support to MSMEs’, a part of the National Manufacturing Competitiveness Programme (NMCP). This scheme focuses on promoting energy-efficient technologies by organizing workshops and awareness programs within MSME clusters.
Under TEQUP, MSMEs receive funding support to participate in training sessions that educate them on the latest energy-efficient processes. These workshops help business owners understand how technology adoption can reduce energy consumption, lower operational costs, and improve overall efficiency. Additionally, the scheme provides financial assistance for product certification to National and International standards, ensuring that MSMEs can compete in global markets. Eligible MSME manufacturing units can avail of a subsidy of up to 75% of the actual expenditure incurred for obtaining product licenses.
By leveraging such government-backed initiatives, MSMEs can modernize their operations, enhance productivity, and build credibility in both domestic and international markets, ultimately driving sustainable growth.
Future of MSMEs with Advanced Technologies
The future of MSMEs in India looks promising with the adoption of advanced technologies. Automation, AI, UPI, IoT, and cloud computing are transforming business operations, enhancing productivity, and reducing costs. Digital payment systems and data analytics enable better financial management and customer insights. With government support and increasing digitalization, MSMEs can scale faster, compete globally, and drive economic growth.
Conclusion
The main goals of technology upgradation for MSMEs are to promote and support both product quality and energy efficiency. It helps reduce the cost of production, adopt a clean development mechanism and remain competitive in both the domestic and international markets.
Kinara Capital recognises the significant impact the MSME sector has on the Indian economy. Kinara provides fast and flexible business loans for MSME customers within 24 hours of completing the application process. MSME entrepreneurs can avail machinery loans to purchase a new or second hand machine. With minimum documentation and a flexible interest and EMI policy, small business owners can upgrade their technology to boost production capacity, improve product quality, invest in green tech, and more.
FAQ
1. What are the most cost-effective technology upgrades for MSMEs?
The most cost-effective technology upgrades for MSMEs include cloud computing, digital payment systems, automation tools, customer relationship management (CRM) software, and energy-efficient machinery. These enhance efficiency, reduce costs, and improve productivity without requiring heavy investments.
2. How does digital marketing help MSMEs expand their reach?
Digital marketing helps MSMEs expand their reach by leveraging social media, SEO, email marketing, and online ads to target wider audiences. It boosts visibility, attracts customers, enhances brand awareness, and drives sales cost-effectively.
3. What government schemes support MSME technology adoption?
Government schemes like the Technology and Quality Upgradation (TEQUP) Scheme, Credit Linked Capital Subsidy Scheme (CLCSS), and MSME Digital Saksham provide financial aid, training, and incentives to help MSMEs adopt advanced technologies and improve competitiveness.
4. How can MSMEs ensure cyber security while upgrading technology?
MSMEs can ensure cybersecurity by using firewalls, encryption, and antivirus software, implementing strong passwords and multi-factor authentication, regularly updating systems, training employees on cyber threats, and backing up data to prevent breaches and data loss.
5. How can MSMEs implement AI and automation cost-effectively?
MSMEs can implement AI and automation cost-effectively by using cloud-based AI tools, low-code platforms, and affordable chatbots, starting with small-scale automation, leveraging government grants, and upskilling employees to maximize efficiency without heavy investments.
6. What is the role of cloud computing in MSME growth?
Cloud computing helps MSMEs by reducing IT costs, enabling remote access, improving data security, and scaling operations effortlessly, allowing businesses to focus on growth while leveraging advanced technology without heavy infrastructure investments.
