Formalization of Nano Enterprises through Digital Platforms: Potential and Challenges

Vibhanshu Kumar (SARDI Fellow), Lalitagauri Kulkarni, Gokhale Institute of Politics and Economics (Mentor, SARDI Fellowship), Vatsima Tripathi and Santanu Pramanik, LEAD at Krea University

March 2024

India’s Micro, Small, and Medium Enterprises (MSMEs), spanning over trade, manufacturing, and service sectors, contribute significantly to both the domestic market and the country’s export landscape. According to the 73rd round (2015-16) of the NSS, India has nearly 63 million unincorporated non-farm MSME enterprises. Nano enterprises can be classified as a distinct segment within the MSMEs as firms with an annual turnover of less than INR one crore (~ USD 120K), characterised by their hyperlocal roots and focus.

In the recent past, several concerted policy and ecosystem efforts have focused on creating a more enabling policy and business landscape for the development of the micro-business sector. Despite this, ground-level data indicates that the incidence of informality in the MSME sector persists.

As part of the SARDI India MSME Tech Policy Fellowship Program (an initiative by USAID & DAI and anchored by LEAD at Krea University), this research delves into the trade sector enterprises with annual turnover between INR 10 lakhs (~ USD 13.33K) and one crore (~ USD 120K), to identify their challenges and opportunities. The study, which draws on insights gathered from 1 683 nano enterprises (~75 per cent registered and 25 per cent unregistered) spread across four states of India, also aims to understand the latent factors, such as perceived usefulness and ease of use, that drive an individual’s behaviour to adopt formalization.



Thematic Area

Small, Growing Businesses and Employment