India’s MSMEs Look to Digital Procurement as a New Engine of Growth

• India’s MSME procurement economy is valued at about $1.31 trillion.

• 80.4% of MSMEs expect digital procurement to support growth within three years.

• Price volatility, supplier management, and credit access remain major challenges.

• Businesses prioritise flexible payments, GST invoices, wider selection, and faster delivery.

• Digital platforms have major room to expand as only 30–40% of procurement is currently online.

India’s micro, small and medium enterprises are moving quickly toward digital procurement, with a large majority expecting online sourcing platforms to become a major driver of business expansion over the next three years, according to a major new survey of the country’s MSME sector.

The findings are part of “Digital Bharat: India Digital Procurement Report 2026,” released by the India SME Forum. The study estimates the size of India’s MSME procurement economy at ₹124.9 trillion, or about $1.31 trillion, underscoring the scale of the opportunity that digital marketplaces and procurement platforms are now competing to serve.

The report is based on the India SME Forum’s proprietary MSME Procurement Economy Model, which draws on official Udyam Registration data and examines the buying patterns of 51.53 million Udyam-registered MSMEs across India.

Released in New Delhi on Wednesday by Shobha Karandlaje, Minister of State for MSME and Minister of State for Labour and Employment, the study highlights the growing importance of digital tools in business purchasing. It found that Amazon Business ranked highest among respondents for price transparency, at 37.3%, and supplier quality, at 32.6%. Moglix, meanwhile, led in the areas of industrial procurement and embedded finance.

Karandlaje said India’s MSMEs are central to the country’s goal of building a developed and self-reliant economy. As firms adopt more digital technologies, she noted, procurement must also move beyond being a routine administrative activity and become a strategic business function. Digital procurement, she said, can help small businesses operate more efficiently, lower costs, reach broader markets, strengthen supply chains, and compete more effectively both domestically and internationally.

The report also points to the still largely untapped potential of India’s MSME procurement market. Mitranjan Bhaduri, Director of Amazon Business India, said the finding that four out of five MSMEs expect digital procurement to support their growth demonstrates that the shift is not merely incremental but transformational. He said Amazon Business would continue investing in product selection, services, automation, and AI-led insights to help companies turn procurement from a cost centre into a source of competitive advantage.

India’s digital procurement ecosystem, the report noted, is far from uniform. A range of platforms are serving different segments and purchasing needs across the MSME landscape. Alongside Amazon Business and Moglix, companies such as Meesho, OfBusiness, Udaan, Flipkart Business, IndustryBuying, IndiaMART, and Jumbotail are playing significant roles in meeting varied procurement requirements.

Despite the growing interest in online sourcing, MSMEs continue to face several persistent challenges. Price volatility emerged as the most common concern, cited by 55.7% of respondents. Other key obstacles included the difficulty of coordinating with multiple suppliers, mentioned by 37.6%; payment and credit-related limitations, cited by 35.6%; and the absence of a single reliable vendor, identified by 33.4%.

When choosing digital procurement platforms, MSMEs are placing strong emphasis on financial flexibility and operational convenience. Nearly half of respondents, or 49.9%, said flexible payment and credit options were a priority. This was followed by GST-compliant invoicing at 45.0%, broader product availability at 43.3%, ease of ordering at 43.1%, and faster delivery at 40.3%.

The survey found that 80.4% of enterprises believe digital procurement will play an important role in expanding their business over the next three years. Looking ahead, 68.7% said they plan to purchase raw materials online, while 61.3% expect to procure machinery and equipment through digital channels.

The policy environment was also a key focus of the report’s release. Ateesh Kumar Singh, Additional Secretary in the Department for Promotion of Industry and Internal Trade, said current measures such as MSME procurement mandates, quality- and cost-based selection, procurement relaxations, Make in India preferences, and startup-friendly procurement norms have created a strong base. However, he cautioned that gaps in enforcement, restrictive eligibility rules, and uneven adoption continue to reduce their effectiveness.

Singh called for coordinated reforms to modernise procurement practices. These include extending quality- and cost-based selection to goods procurement, updating procurement thresholds, strengthening mobilisation advances, linking performance security with credit guarantee systems, and introducing procurement relaxations tailored to specific sectors.

The study also reveals the significant scale at which MSMEs are already spending on procurement. More than 75% of surveyed businesses reported monthly procurement expenditure between ₹1 million and ₹10 million, equal to approximately $0.011 million to $0.105 million. Even so, only 30% to 40% of procurement spending currently takes place through digital channels, suggesting a large remaining opportunity for online platforms and digital transformation initiatives.

Another important finding is that procurement decisions remain highly owner-driven. The report found that 64.5% of such decisions are still made directly by business owners. This indicates that digital procurement platforms must prioritise simplicity, accessibility, and ease of use rather than relying on complex enterprise-style workflows that may not suit smaller firms.

Vinod Kumar, President of the India SME Forum, said digital adoption has already gained momentum, with more than two-fifths of MSMEs using digital procurement for over two years. However, he said the next stage will involve helping businesses move from occasional online purchases to fully integrated, data-led procurement systems.

Achieving that shift, Kumar added, will require cooperation among industry participants, digital enablers, and policymakers. As India’s MSMEs continue to modernise, digital procurement is increasingly emerging as a critical pathway for improving efficiency, reducing risk, and unlocking growth across one of the country’s most important business segments.