India Struggles to Adopt AI in SMEs and MSMEs

AI is not being fully leveraged in the small and medium-sized enterprises (SMEs) and micro, small, and medium enterprises (MSMEs) manufacturing sectors in India. At the Bangalore Chamber of Industry and Commerce (BCIC) summit on Wednesday, industry experts emphasised that it should be viewed as a chance for transformation rather than a disruptive threat.

The discussions focused on ‘Transforming industries with AI to achieve unmatched productivity and efficiency’. Industry leaders stressed the need for businesses to leverage AI's capabilities to enhance processes, make better decisions, and grow sustainably in a progressively digital economy, The Hindu reported. 

India boasts a large manufacturing sector, with more than 90% of our industrial enterprises classified as MSMEs. As stated by G Prakash, chairperson of the manufacturing expert committee, BCIC, these businesses are responsible for almost 30% of India’s GDP, provide jobs for 110 million individuals, and represent 48% of India’s exports.

“Many MSMEs have yet to embrace digitalisation or AI, often perceiving these technologies as costly and complex. AI-driven solutions now available through affordable cloud-based and plug-and-play models can deliver productivity gains of 15% to 30%, enabling predictive maintenance, quality monitoring, and energy optimisation, even in small-batch environments,” he added, as reported by Deccan Herald. 

Despite being vital to the economy, MSMEs struggle with outdated processes, low digital adoption, and limited access to technology. AI bridges this gap by providing affordable automation, data-driven insights, and personalised customer experiences—once only available to large enterprises.

According to a PwC India report, AI adoption in MSMEs could boost India's GDP by $500 billion by 2025, making it one of the most impactful innovations for the country’s economy.
AI supports the development of smart supply chain management systems in Indian SME manufacturing. It analyses supply and demand patterns, optimises inventory, and improves demand forecasting, allowing SMEs to reduce stockouts and inventory costs while enhancing efficiency. By adopting AI solutions, Indian SMEs can better respond to market changes, collaborate with suppliers, and ensure timely product delivery.