India’s Micro, Small, and Medium Enterprises (MSMEs) are often called the backbone of the economy. They account for nearly 30% of the country’s GDP and employ over 110 million people. Yet, despite their crucial role, only about 15% of Indian MSMEs have adopted Artificial Intelligence (AI) in their operations.
In a world rapidly being transformed by technology, why is AI adoption among MSMEs still so low? Let’s explore the key reasons and what can be done to overcome them.
Many MSME owners are either unaware of AI or have a limited understanding of how it can benefit their business. AI is often seen as a complex or “big company” technology, rather than something that small businesses can use. As a result, decision-makers may not even consider it an option.
Solution: Industry bodies, tech providers, and the government need to create simplified education campaigns and success stories focused on MSME-friendly AI use cases—like automating invoicing, improving customer service, or forecasting demand.
AI tools are often seen as expensive. For businesses running on tight budgets, investing in AI can feel risky—especially if the return on investment (ROI) isn’t clear upfront.
Solution: Affordable, subscription-based AI solutions tailored for MSMEs are emerging. Encouraging trials, offering tax incentives, and bundling AI with existing software can help break the cost barrier.
AI adoption isn’t just about buying a tool—businesses need people who can operate it. Most MSMEs struggle to find or afford talent with the right technical skills.
Solution: Platforms offering “AI-as-a-service” can reduce the need for in-house expertise. At the same time, short-term upskilling programs for MSME employees can bridge the talent gap.
AI depends on clean, accessible digital data and reliable internet access. Many MSMEs, especially in Tier-2 and Tier-3 cities, still rely on paper-based systems or outdated software.
Solution: Before pushing AI adoption, we need to support MSMEs in their basic digital transformation journey—getting online, using ERPs or CRMs, and building a data culture.
There’s also an emotional barrier. Many MSME owners have run their businesses in a certain way for decades. AI sounds like a big shift—and with that comes fear of disruption or job loss.
Solution: Change management is critical. Showcasing how AI can assist—not replace—existing teams can ease fears. In many cases, AI helps small teams do more with less, improving job satisfaction.
To unlock the full potential of India’s MSME sector, AI adoption must go mainstream. The 15% currently using AI are already seeing improvements in efficiency, customer experience, and revenue. But to scale this success, we need a coordinated push involving:
Accessible technology
Awareness campaigns
Government and financial incentives
Public-private partnerships for skilling
With the right support, India’s MSMEs can move from being digital followers to tech-powered leaders fueling inclusive economic growth across the country.