Rajat Tandon, President of the Indian Venture and Alternate Capital Association (IVCA), has shared valuable insights on how technology and AI can help boost job creation and empower startups in India. He believes that India’s economic strength lies not only in major cities but also in tier-2 and tier-3 cities, where the entrepreneurial spirit is thriving.
However, micro, small, and medium enterprises (MSMEs) often face challenges like adopting new technologies, accessing credit, and entering global markets. Overcoming these challenges is crucial for making them more competitive and supporting economic growth.
Role of Technology in MSMEs
Tandon emphasized that integrating new technologies can greatly improve productivity and competitiveness for MSMEs, which play a vital role in India’s economy. The MSME sector is expected to reach USD 1 trillion by 2028, showcasing its potential for creating jobs and driving innovation. But to maintain this momentum, addressing existing issues is essential. These include providing better support for tech adoption, improving access to credit lines, and facilitating entry into global markets.
Women Entrepreneurs and Inclusivity
The discussion also highlighted the challenges faced by women entrepreneurs in India. According to the MSME Ministry’s 2020-21 Annual Report, only 20 per cent of India’s 63 million MSMEs are owned by women. Tandon pointed out that more support is needed to encourage women to take on leadership roles, noting that women today are increasingly becoming risk-takers and decision-makers.
Challenges and Solutions for MSMEs
Tandon described MSMEs as the backbone of employment in India, underlining the need for a supportive business environment. He noted, “One of the biggest challenges was that there was never a collateral-free loan available for MSMEs.” Other issues include finding skilled labour, dealing with regulatory processes, and accessing international markets. Tandon explained that while startups are developing solutions for urban India, MSMEs are serving broader communities, highlighting the importance of both sectors working together.
Tandon also spoke about the importance of long-term capital flow through private equity, venture capital, and angel investments. He believes these funding sources can strengthen startups and MSMEs, ensuring their continued growth and contribution to the economy.
Role of AI in Economic Development
Tandon noted the rapid growth of India’s generative AI startup ecosystem, which has expanded 3.6 times in the first half of 2024. This growth includes infrastructure, applications, and services, showing how important AI is becoming in various industries. Tandon stressed that AI is more than just a technology—it has the potential to create jobs and boost human abilities.
The integration of AI and technological solutions can help India’s MSMEs and startups grow stronger, create jobs, and innovate. Supporting these efforts through funding and encouraging inclusivity will be key to ensuring sustainable economic growth.
