India’s MSMEs embrace digital future, but fragmented adoption persists

On the occasion of World MSME Day, Vi Business, the enterprise arm of telecom operator Vodafone Idea (Vi), has released the third edition of its flagship report, Ready for Next MSME Growth Insights Study 2025.

As India’s digital economy accelerates, propelled by initiatives such as Digital India, BharatNet, and the widespread adoption of mobile broadband, small and medium enterprises (SMEs) are increasingly turning to digital tools to enhance operational efficiency and expand market access.

The latest edition of the Ready for Next study reflects this positive momentum, highlighting a consistent rise in the country’s Digital Maturity Index (DMI). However, the findings also reveal that digital adoption remains fragmented. With the right financial backing and strategic advisory support, India's MSMEs are well positioned to fast-track their digital transformation journeys.

Commenting on the report’s release, Arvind Nevatia, Chief Enterprise Business Officer at Vodafone Idea Ltd, said, “MSMEs in India are clearly moving from digital curiosity to digital commitment,  and that’s an encouraging shift. The sharp rise in investment intent around cloud, cybersecurity, and automation shows that small businesses increasingly see technology as a growth enabler, not just a utility. Through the Ready for Next programme, our aim is to celebrate the incredible growth journeys of India’s MSMEs,  from small towns to global markets, and from manual processes to becoming digital-first enterprises.”

Key Highlights from the Ready for Next MSME Growth Insights Study 2025:

South India Leads the Digital Charge – Telangana Tops National Rankings

India’s national DMI rose steadily from 56.6 in 2023 to 57.3 in 2024, and now stands at 58.0 in 2025. Regionally, South India leads the digital transformation with a DMI of 62.9, followed by the West (57.4), East (57.1), and North (55.8).

Among individual states, Telangana has emerged as the digital frontrunner with a DMI of 71.2. The evolution of Hyderabad into “Cyberabad”, supported by global tech presence, government-backed digital infrastructure, and a thriving startup ecosystem,  has been instrumental in boosting MSME digital adoption. Kerala follows with a DMI of 63.7, capitalising on high digital literacy and a strong services sector. Maharashtra ranks third at 59.2, driven by Mumbai’s financial sector and Pune’s IT and industrial base.

Rising Investment in Digital Tools – Cloud and Cybersecurity Take Centre Stage

While digital maturity varies across sectors, the study reports a significant uptick in digital investment intent across the board. Professional Services leads the way in increased digital transformation budgets, followed by Retail, Logistics, Transportation, Media & Entertainment, Manufacturing, Telecom, Agriculture, Financial Services, and Healthcare.

Encouragingly, 72% of MSMEs plan to boost their cloud expenditure, and 76% have prioritised cybersecurity, reflecting growing concerns about cyber threats and the need for robust digital defences.

Gender and Generational Trends in Digital Leadership

Women entrepreneurs are making notable strides in digital adoption, achieving a DMI of 57.4 compared to 57.7 for their male counterparts. In sectors such as Education and IT, women are even leading in the uptake of cloud and security solutions, albeit from a smaller base.

Entrepreneurs aged 40–60 continue to drive digital maturity (DMI: 64.0), challenging the perception that digital innovation is dominated by younger founders (DMI: 57.0).

Adoption Grows – But Fragmentation Persists

While overall digital maturity is improving, only 12% of MSMEs have reached full digital maturity. Adoption remains fragmented, particularly among micro and small businesses. Gaps persist in key areas such as customer engagement technologies and internal collaboration platforms. The findings suggest that while intent to digitise is growing rapidly, execution is lagging, often due to limited financial capacity and lack of advisory support.

Financial Capacity: A Key Enabler – and a Major Barrier

The study underscores that digital adoption is closely tied to financial capacity. MSMEs with higher turnover (typically in the Rs 50–100 crore+ range) report significantly higher digital maturity, enabled by their ability to invest in advanced tools across cloud, automation, and customer engagement.

Conversely, smaller or younger MSMEs, despite being digitally aware, are taking a phased approach to adoption due to budgetary constraints. Vi Business’s Ready for Next initiative, certified by CyberMedia Research (CMR) as India’s largest digital advisory platform for MSMEs, has engaged over 2 lakh MSMEs across more than 15,000 pin codes and 16 sectors over the past three years.

As digital transformation continues to reshape the business landscape, such initiatives will play a critical role in empowering India’s MSMEs to unlock their full potential and contribute meaningfully to the nation’s digital economy.