Digital Transformation Strategy, IT Governance Maturity and Firm Performance in Indian Small and Medium Enterprises

India's 63.4 million Micro, Small and Medium Enterprises (MSMEs), contributing 30% of GDP, 45% of exports, and employing 120 million workers, represent the economy's most critical and most under-digitised segment. The government's MSME Digital Transformation Initiative (2022-2027) targeting 5 million digitally enabled MSMEs by 2026 through SIDBI, NASSCOM, and state government digital skilling programmes has accelerated technology adoption but has exposed a significant capability gap: many SMEs are adopting individual digital tools (UPI payments, GST filing software, WhatsApp Business) without the underlying IT governance framework required to extract strategic value from integrated digital transformation.This study examines the relationship between digital maturity, IT governance quality, and firm performance (ROA, revenue growth, employee productivity) across 412 Indian SMEs in manufacturing (n=148), services (n=164), and agro-processing (n=100) sectors in Tamil Nadu and Maharashtra, using a cross-sectional survey with validated digital maturity assessment instrument (Gartner Digital Business Score adapted for SME context) and audited financial data from MCA21 returns. Structural equation modelling confirms that digital maturity significantly predicts firm performance (β=0.58, p<0.001), fully mediated by IT governance quality (β=0.44, p<0.001) — meaning that technology adoption without governance mechanisms fails to translate into performance outcomes. Skill gaps (72.4% severity), legacy system constraints (68.2%), and cybersecurity concerns (64.8%) are the three highest-severity barriers. Medium-sized firms (100-499 employees) show the highest digital ROI relative to investment, suggesting a sweet-spot of organisational complexity and resource availability.