Indian SMBs focus on global expansion amidst tech, operational hurdles | News
The small and medium-sized businesses (SMBs) in India are looking at technological advancements as a key driver for better global exposure. The second annual SMB Ambitions Barometer 2024 report, released by Payoneer in collaboration with Oxford Economics, highlighted the current ambitions and challenges of small- and medium-sized businesses (SMBs) in India.
While India is ahead of its global peers when it comes to the adoption of artificial intelligence, the impact of rising import duties and cross-border payment hurdles are curtailing their ability to expand global operations.
The report, which surveyed 3,779 SMB decision-makers, including 252 from India, highlighted the SMBs goals, achievements, and difficulties in the ever-evolving global marketplace.
Increasing global presence
Globalisation remained a critical priority for Indian SMBs. Over 61 per cent of surveyed businesses identified technological advancements as key drivers for better global exposure. Currently, the US accounts for nearly 40 per cent of cross-border transactions for Indian SMBs, followed by countries like Australia, China, and the UK. With ongoing efforts to tap into global markets, Indian SMBs are focusing on regional expansions, particularly in South Asia and East Asia, where growth opportunities are plentiful.
Technological transformation: a critical need
The report mentioned that India is ahead of its global peers when it comes to the adoption of artificial intelligence (AI). Roughly 26 per cent of Indian SMBs have implemented AI across various business areas, compared to a global average of 20 per cent. Over 78 per cent of Indian businesses see technological change as a key driver of innovation, with plans to increase investment in emerging technologies such as AI and digitisation.
This push towards technological transformation has already had a significant impact. The report revealed that businesses that have digitised their operations are better equipped to improve efficiency, customer satisfaction, and overall profitability. Indian SMBs are focusing on automating repetitive tasks, digitising their inventory, and improving technological skills within their workforce.
Employment and local economic impact of SMBs
Indian SMBs continue to be major contributors to local employment. The report estimated that SMBs in India have created over 6 million jobs between 2021 and 2022, the report said. Furthermore, 67 per cent of businesses report that their operations are the sole source of household income, underlining their importance to local economies.
However, Indian businesses still trail behind global averages in terms of hiring local talent, with 49.8 per cent of hiring being local, compared to the global average of 57 per cent.
Cross-border payments and regulatory hurdles
While Indian SMBs are increasingly engaging in cross-border transactions, they face significant operational challenges. Over 45 per cent of these businesses struggle with issues like foreign exchange rates, international trade compliance, and slow transaction times. Additionally, language and cultural barriers (38 per cent) and high debt-to-income ratios (39 per cent) are major hurdles to global expansion.
However, there is optimism surrounding digitisation. More than 58 per cent of Indian SMBs have adopted multiple payment options, such as real-time currency conversion and automated tax calculations, to ease cross-border trade, the report added. Nevertheless, difficulties in cross-border payments continue to hamper their efforts to grow internationally.
Policy concerns of SMBs
One of the most pressing concerns for Indian SMBs is the impact of rising import duties. Government policies, including increased import duties since 2017, have disproportionately affected SMBs. Larger companies that produce raw materials have passed the cost burden to smaller businesses, reducing their competitiveness.
Additionally, high debt-to-income ratios and access to affordable credit remain crucial hurdles. Despite accounting for 97 per cent of total enterprises, Indian SMBs contribute only slightly over 40 per cent to the country’s exports. A relatively small proportion, fewer than one million out of the country’s 51 million SMBs, are engaged in global trade.
Business models of Indian SMBs
The report also highlighted the distribution of Indian SMBs between business-to-business (B2B) and business-to-consumer (B2C) models. A significant 46 per cent of Indian SMBs primarily cater to consumers (B2C), while only 21.8 per cent operate in the B2B space. Around 32.1 per cent of businesses have a balanced mix of B2B and B2C customers.
Future outlook and growth strategies
Looking ahead, Indian SMBs remain optimistic about the future. More than 83 per cent expect their revenues to increase in the next 12 months, with a significant focus on expanding into neighbouring markets. South Asia and East Asia are top priorities, with 20 per cent of Indian businesses planning to enter South Asian markets over the next five years. Their focus on regional expansion is seen as a strategic goal to tap into emerging markets with geographical proximity.
While the outlook is largely positive, the report cautioned that Indian SMBs must address operational inefficiencies and global challenges to maintain their growth momentum.
First Published: Sep 23 2024 | 3:34 PM IST
