NEW DELHI: Less than 2% of India's 40m small and medium-sized firms are leveraging the internet to improve their business prospects, Google's president for Asia Pacific has claimed.

Just 500,000 firms in this category are online, said Karim Temsamani, Google Asia Pacific's president. "This figure needs to rise if these entities want to reach their consumers at lowest cost and raise their profits," he added.

There are several factors that could be holding them back, Temsamani said. Lack of infrastructure was "a major issue", while the country's language diversity was also "a major bottleneck".

Temsamani also pointed to the low investment on mobile technology and platforms as another limitation to growth.

"One needs to understand the fact that more and more consumers are using mobile devices," he stated. "If yours is a small business, then not only is it your opportunity, but the capability of these devices have will provide you a great business advantage."

He cited Google's AdWords as the advertising platform by which they could reach consumers and claimed that this programme had already helped "200,000 such SMBs realise their potential online".

Separately, a report from McKinsey, the consultancy, said that India was on the verge of an internet boom and had the potential to double its economic contribution from the internet, from the current 1.6% of GDP to to between 2.8% and 3.3% by 2015.

"Across Asia, SMEs who use the internet say it has helped them gain revenue and reduce costs. SMEs also reported an average 13% improvement in productivity from using web technologies," the repport stated.

Anu Madgavkar, one of the report's authors, said that Indian SMBs would benefit from this trend more people accessed the internet.

"Internet users in India are expected to touch 350-450 million by 2015-16," she observed, "and this will act as a catalyst in the growth of SMBs as they will find more and more of their target users online."

Data sourced from The Hindu Business Line, McKinsey; additional content by Warc staff