Boosting growth: Integrate MSMEs and e-commerce to surge GDP globally

India made history when, in 2025, it emerged as the world’s fourth-largest economy (in nominal GDP terms), as confirmed by the IMF and NITI Aayog. India’s GDP is now $4.19 trillion, edging past Japan’s $4.18 trillion, racing to cross Germany for the third rank by 2027. It will then rank behind only the US ($30.5 trillion) and China ($19.2 trillion). A creditable moment indeed for a nation which got independence only 78 years ago! However, closing the gap with China will be a big challenge, though not impossible.

 

When we look back, in 1990, India and China were nearly at par in GDP, with India’s per capita income at $367 and China’s at $317. However, later China zoomed astronomically, leaving India far behind. By 2022, China’s per capita income had risen to $12,720 while India’s stood at $2,388.

 

China’s meteoric rise has been driven significantly by the revolutionary growth of micro, small, and medium enterprises (MSMEs), supported by e-commerce and wedged with exports globally.

 

MSMEs and e-commerce have been the backbone of China’s industrial growth. China has over 48 million MSMEs, accounting for more than 97% of all enterprises, 60% of GDP, 80% of urban employment, and 70% of tech innovation. Post-reform, their MSMEs were instrumental in absorbing surplus rural labour. Their agility and dynamism boosted exports, especially in light manufacturing, consumer goods, textiles, electronics, and machinery.

 

It is true that the Chinese pattern of authoritarian one-party government is different from India’s democratic system, yet we have our own advantages, with states many times larger than several European countries. We can identify economic drivers and introduce targets and competition. The Chinese government used a system of cluster development, with regions like the Pearl River Delta and Yangtze River Delta becoming global manufacturing hubs, with industry-specific clusters of MSMEs. The government and local authorities created a conducive environment by simplifying business registration, offering tax incentives, improving access to credit through state banks and fintech, and encouraging MSMEs to integrate with global value chains, for which they massively used e-commerce. Platforms like Alibaba, JD.com, and Pinduoduo revolutionised retail by integrating MSMEs. E-commerce bridged urban–rural divides; initiatives like Taobao Villages allowed rural producers to directly sell agricultural and handmade products, boosting rural incomes. China expanded and fortified logistics and leveraged e-commerce into global e-export powerhouses, enabling MSMEs to tap into international demand with platforms like Alibaba’s AliExpress and global supply chains.

 

In India also, several things are happening—and more are possible. For example, Walmart, through its majority-owned e-commerce arm Flipkart, is boosting India’s exports by sourcing Indian-made goods worth $10 billion annually by 2027, including apparel, food, toys, and pharma, as stated by Walmart CEO Doug McMillon after meeting PM Modi. They are also undertaking programmes to strengthen logistics with states and supporting business skills. There are similar initiatives being pioneered by other e-commerce companies like Amazon. 

 

India’s e-commerce market was valued at $74 billion in 2024, and is expected to cross $300 billion by 2030 (8–10% of retail). E-commerce platforms including ONDC have democratised market access for MSMEs, with 70% of online sellers being small businesses, including women, artisans, and craftsmen. Their exports through e-commerce can significantly reduce India’s trade deficit, $78 billion in FY2024, fuelling GDP growth.

 

To close the GDP gap with China, MSMEs, e-commerce, states, logistics growth, and the private sector must work synergistically, with time-bound targets and rewards.

 

A few action points:

 

Agriculture: Modernise agriculture (18% of GDP) through irrigation (e.g., AIBP), cold storage, and processing to reduce spoilage (33% of production lost).

 

Services: Expand IT, e-commerce, and financial services, which drive 50%+ of GDP.

 

Energy and Chemicals: Scale up refining capacity and chemical production (5% of GDP) to reduce import dependence.

 

Infrastructure Investment: Increase infrastructure spending to $200 billion annually to boost growth by 2–4%, especially in irrigation and smart cities to enhance productivity.

 

Skill Development: Invest heavily in education and vocational training to improve workforce productivity, with measurable targets.

 

Job Creation: Promote labour-intensive industries like textiles and identified MSMEs with high job potential.

 

Urbanisation: Develop urban centres to absorb rural labour, reducing pressure on agriculture (18% of GDP but employs 45% of the workforce), with housing.

 

Make in India Expansion: Strengthen programmes like “Make in India” to increase manufacturing’s GDP share to 25% by 2030. Focus on electronics, automotive (India is the fourth-largest producer globally), and pharmaceuticals.

 

Supply Chain Integration: Capitalise on global shifts as manufacturing leaves China (China+1 initiatives) due to geopolitics and cost advantages in India. Attract FDI in semiconductors, renewable energy, and EV production.

 

AI and Digital Economy: Promote AI adoption in healthcare, agriculture, and finance. India’s digital economy (e.g., UPI, IT services) can drive growth.

 

R&D Investment: Increase R&D spending (currently 0.7% of GDP vs China’s 2.4%) to foster innovation in green tech, biotech, and space.

 

Startup Ecosystem: Support India’s startup ecosystem (third-largest globally) to create high-value and job-intensive industries. Promote competition within states.

 

Trade Agreements: Deepen FTAs with the USA (just announced), EU, ASEAN, and African nations to boost exports.

 

If we can provide the throttle-thrust to various economic engines with the right regulatory policies, effective single-window service at all levels, and integrate MSMEs with e-commerce—along with competition within states and aspirational districts—it will not be impossible to reach the desired goal.

 

(Dhanendra Kumar has been India’s Executive Director at the World Bank and the first Chairman of the CCI. He is currently Chairman of Competition Advisory Services India LLP (COMPAD).

 

Disclaimer: These are personal views of the writer. They do not necessarily reflect the opinion of www.business-standard.com or the Business Standard newspaper