Supplier gaps, invoice compliance, credit access continue to hit 5 in 10 MSMEs: Survey

The micro, small and medium enterprises (MSMEs) are increasingly adopting digital procurement solutions, but longstanding operational challenges continue to constrain their growth, according to a nationwide LocalCircles survey released ahead of World MSME Day 2026.

The study found that digital marketplaces are helping MSMEs improve procurement efficiency through competitive pricing, broader supplier networks, quicker purchasing cycles, and GST-compliant invoicing. However, more than half of the surveyed enterprises continue to grapple with issues such as supplier management, payment and credit constraints, regulatory compliance, and fluctuating input prices.

The study on MSME procurement, based on responses from over 16,000 MSMEs across 137 districts, comes at a time when India's MSME sector, comprising over 7.4 crore registered enterprises, continues to drive employment, manufacturing, exports and economic growth. With procurement representing one of the largest recurring operating expenses for most businesses, the survey highlights a major shift from traditional offline purchasing to technology-enabled procurement ecosystems.


The findings show that India's MSME landscape is dominated by micro enterprises. Seven in ten surveyed businesses employ ten or fewer people, while six in ten responses came directly from founders, co-founders or owners, ensuring that the survey reflects the views of key procurement decision-makers. Manufacturing, business services and retail or wholesale together account for roughly 70% of the businesses represented.

Procurement requirements remain substantial across sectors. Around seven in ten MSMEs regularly purchase IT equipment, office supplies, packaging materials, pantry items and housekeeping products. More than three in ten businesses spend over Rs 2 lakh every month on procurement, while one in ten spends over Rs 10 lakh, underlining the strategic importance of procurement efficiency.

Despite increasing digitisation, procurement remains challenging. Managing multiple suppliers emerged as the biggest concern, followed by non-compliant invoices, payment and credit constraints, and frequent price volatility. Limited product availability, difficulty comparing suppliers, poor spend visibility, inconsistent product quality and delayed deliveries also remain significant pain points, with only about one in ten businesses reporting no major procurement challenges.

Digital procurement, however, is steadily changing this picture. Seven in ten MSMEs using B2B digital marketplaces said their dependence on these platforms has increased over the last two years. Businesses cited wider product selection, ease of comparison across suppliers, centralised spend visibility and GST compliant invoicing, along with discounts and ease of ordering or delivery etc. as the primary reasons driving adoption.

The operational benefits are equally significant. Eight in ten MSMEs using digital marketplaces complete their procurement cycle within a week, compared with only six in ten businesses relying on traditional procurement channels. Notably, none of the surveyed digital marketplace users reported procurement cycles extending beyond two weeks, highlighting meaningful gains in efficiency, inventory management and working capital utilisation.

Compliance has also become a decisive factor in marketplace selection. Every surveyed MSME using digital procurement identified GST-compliant invoicing as critical, while nearly three-fourths also considered downloadable invoice histories essential for audits and record keeping. Many respondents also valued accounting software integration and automated financial documentation.

Looking ahead, digital adoption is expected to accelerate further. Eight in ten MSMEs anticipate increasing their use of B2B digital marketplaces over the next one to two years, while six in ten expect greater deployment of AI-powered procurement tools and software automation. Businesses also foresee broader supplier diversification and increased use of credit and pay-later solutions.

In addition to the behavioural survey, LocalCircles assessed eight leading B2B digital procurement platforms on parameters including service quality, regulatory compliance, delivery efficiency, customer support and overall value. Amazon Business emerged as the highest-rated platform, followed by OfBusiness, Flipkart Wholesale and Udaan. The assessment found that customer service and delivery speed were the weakest-performing areas across platforms, highlighting key gaps that providers will need to address as competition in the sector intensifies.

The report notes that India's digital public infrastructure, including GST, UPI, GeM and ONDC, along with sustained government support for MSMEs, is accelerating the shift towards digital procurement. With India's B2B e-commerce market projected to reach nearly $200 billion by 2030, platforms offering transparent pricing, regulatory compliance, flexible financing, AI-driven automation and reliable customer support are expected to be best positioned to drive the next phase of MSME digital transformation.