The AI Advantage for MSMEs

Artificial intelligence (AI) is no longer a technology reserved for large enterprises or tech startups, it is rapidly becoming a transformative force for micro, small, and medium enterprises (MSMEs) across India. From streamlining operations and automating repetitive tasks to enabling smarter decision-making and unlocking access to global markets, AI is helping small businesses compete at scale and innovate faster than ever before.

As MSMEs form the backbone of India’s economy, adopting AI is not just an operational upgrade, it is a strategic advantage that can enhance productivity, drive growth, and strengthen India’s position in the global marketplace.

Unlocking Growth and Resilience for MSMEs

Artificial intelligence is redefining competitiveness for MSMEs by providing powerful tools to operate smarter, faster, and more efficiently. By automating routine processes, enabling data-driven decisions, and enhancing customer experiences, AI is helping small and medium enterprises increase productivity, strengthen resilience, and scale their businesses globally. Beyond broad economic benefits, AI adoption delivers direct, measurable value for entrepreneurs, improving productivity, reducing costs, and expanding access to financial services.

Indian MSMEs accelerated their adoption of AI and ML in 2024, embracing these technologies as key drivers of competitiveness and growth. The India AI Mission played a pivotal role in building a robust AI ecosystem by strengthening infrastructure, promoting research and innovation, and developing AI talent through the establishment of AI Centres of Excellence (CoEs).

Initiatives such as FutureSkills PRIME, a collaboration between MeitY and NASSCOM, are helping upskill India’s workforce in emerging technologies while supporting MSMEs in their digital transformation journeys. At the same time, AI-powered fintech solutions are becoming critical for financial inclusion, enabling MSMEs, many of which face challenges in accessing credit and loans from traditional banks, to secure affordable financing and scale their operations.

Addressing Challenges in AI Adoption

As AI reshapes industries in India, MSMEs must navigate challenges around patent inventorship, eligibility, infringement, copyright, and trademarks. According to a report by CII, MSMEs must follow ‘trustworthy-by-design’ principles, ensuring reliability, ethics, and human centricity from the beginning. MSMEs can use pre-built explainable models and open-source toolkits for responsible AI adoption. Additionally, they can implement lightweight practices inspired by OECD AI principles and UNESCO AI ethics to meet ethical expectations. 

By embedding transparency, accountability, and ethical oversight into AI initiatives, MSMEs not only mitigate legal and reputational risks but also build trust with customers, investors, and global partners, positioning themselves for sustainable growth in an increasingly AI-driven economy.

AI for MSMEs: An Imperative for India’s $7 Trillion Vision

Strengthening the MSME sector and equipping them with the latest technology is essential if India is to attain the ambition of being a $7 trillion economy, the world’s third largest, by 2030. For MSMEs, AI is both a strategic enabler, and a source of new vulnerability. While it opens doors to automation, improved decision-making, and global market access, it also demands careful attention to digital interoperability, responsible deployment, and upskilling. If these challenges are addressed, AI adoption in MSMEs has the potential to unlock $490 – 685 billion in economic value.

The path forward requires coordinated action, where industry associations, technology providers, financial institutions and policymakers work together to democratize access to AI tools, affordable compute infrastructure and targeted skilling programs. With the right safeguards and support mechanisms in place, AI can transition from being an experimental technology to a foundational growth driver for medium and small businesses, empowering them to scale, innovate and emerge as global leaders in an AI-driven economy.