A recent Certified Practising Accountant (CPA) Australia survey reveals an overwhelming optimism among Indian small businesses, with 84 per cent anticipating continued growth in 2024, significantly surpassing the market average of 70 per cent.
Despite global economic uncertainties, 80 per cent of Indian respondents remain confident about the local economy’s prospects for 2024, well above the survey average of 65 per cent.
This buoyant outlook has been on an upward trajectory since 2022, highlighting the resilience and dynamism of India’s small business sector.
CPA Australia survey showed a rise in the growth rate of Indian small businesses from 73 per cent in 2022 to 77 per cent in 2023–the highest since 2019.
Indian small businesses are riding a wave of optimism and growth, according to CPA Australia’s latest annual Asia-Pacific Small Business Survey.
The survey reveals that over three-quarters of Indian small businesses reported growth in 2023, surpassing pre-pandemic levels and making India’s small business sector one of the most dynamic and fastest-growing in the Asia-Pacific region.
Prafulla Chhajed, a CPA member of CPA Australia in India, emphasized the critical role of Micro, Small, and Medium-sized Enterprises (MSMEs) in driving India’s economic success.
Chhajed said, “Micro, Small and Medium-sized Enterprises (MSMEs) are making a significant contribution to India’s economic success. Not only is India’s rapid economic growth and improving business environment boosting their confidence, support from the government ranging from digitalisation to access to funds, is assisting businesses to recover from the pandemic.”
He further said, “India’s small businesses are enthusiastically improving their performance through innovation, adopting technologies, and building connections with overseas markets. ‘Good staff’ was nominated as the top positive factor that benefited India small business performance in 2023. It explains why Indian respondents have been so willing to add new employees over the past two years”.
“This year the pace in jobs creation by small businesses is expected to slow, although remain high in comparison to other markets. This is most likely due to a combination of factors including increasing levels of automation and rising labour costs,” he added.
However, Chhajed cautioned that the pace of job creation might slow down due to rising automation and labor costs, though it will still remain high compared to other markets.
The survey highlighted several challenges faced by Indian small businesses, including increasing costs, competition, and cashflow difficulties.
Staff and material costs were particularly detrimental in 2023, rising slightly from the previous year. To cope with these expenses and support growth, 68 per cent of small businesses sought external funding last year, though this figure dropped 20 percentage points from 2022. This year, 81 per cent plan to seek finance, despite tougher financing conditions.
Only 42 per cent of respondents found it easy to secure funds in 2023, a sharp decline from 69 per cent in 2022. This trend is expected to continue, with just 43 per cent anticipating ease in accessing funds this year, down from 64 per cent previously.
“Difficulty in accessing finance is a common challenge for small businesses worldwide. Though government loans like Pradhan Mantri MUDRA Yojana (PMMY) helps to foster entrepreneurship by offering financial support, MSMEs should not solely rely on borrowing to fund their long-term development, particularly in a high-interest rate environment”, Chhajed explained.
A significant number of Indian small businesses focused on managing costs and cash flow last year. Among the technologies they invested in, accounting software was particularly popular, with 23 per cent adoption.
Professional advice was also sought frequently, with 34 per cent consulting accountants and 38 per cent seeking advice from friends and family.
“Indian MSMEs are very competitive in many areas such as digitalisation and innovation, now they should focus on cost management and cashflow to increase their financial return.
It’s wise to use accounting software to control cost and analyse financial performance regularly. Further, financial experts like qualified accountants may provide professional advice to small businesses to manage technical issues like taxation and improve financial performance”, Chhajed suggested.
Indian small businesses also show a strong inclination towards innovation and global expansion. Leading the 11 surveyed markets, 34 per cent of respondents expect substantial revenue growth from overseas markets this year, significantly higher than the survey average of 19 per cent.
Additionally, 44 per cent plan to introduce new products or services, compared to the market average of 29 per cent.
Chhajed said, “The Indian government has established good platforms to bolster our MSMEs’ global expansion, for example, international trade fairs for MSMEs.
He added, “They could leverage these opportunities to connect with overseas customers and promote their novel products globally. Besides, our thriving digital economy also fosters MSMEs’ innovation and revolution in the digital era.”
The survey gathered insights from 4,222 small businesses across 11 Asia-Pacific markets, including 505 respondents from India, providing a comprehensive overview of the region’s small business landscape.