SMEs in India increase revenues by 51% and profits by 49% when utilizing the internet for business.
In this July 2013 report, Nathan Associates investigates the role of the internet and its economic significance for the performance of small and medium-sized enterprises (SMEs) in India. The report conducts a survey of 951 Indian SMEs to discover their level of digital engagement and finds that, controlling for other factors, using internet for business increases both revenue and profits by roughly 50% for SMEs. It is estimated that an average SME adopting the internet is able to grow its customer base by 7% and boost employment by 4%.
Nathan Associates notes that the growth experienced by SMEs adopting internet for business increases with usage intensity. SMEs that use 10GB of internet data on average per month have 7% - 32% higher revenue and 8 – 43% higher profits than SMEs using only 5GB. These SMEs also experience higher employment growth and a larger customer base.
The report notes that internet adoption among SMEs in India is still underwhelming, despite the apparent benefits. For instance, of those SMEs using the internet only 49% had their own website and only 51% used the internet to advertise. Nathan Associates highlights high IT costs, a weak electronic commerce environment and a general lack of digital literacy as the main barriers to internet adoption by SMEs in India. To enable Indian SMEs to unleash the full potential of the internet the report suggests policymakers should encourage competition in the IT market, boost the e-commerce environment by strengthening regulations, promote the adoption of internet use among SMEs and improve computer-related education to tackle the lack of digital literacy.