Micro, small, and medium enterprises, or MSMEs, are the backbone of the country’s economy. During 2021-22, the share of MSME's Gross Value Added (GVA) in India’s Gross Domestic Product (GDP) was 29.2%. The sector has also been a major source of employment in India, with MSMEs registered between July 2020 and February 2024 employing more than 170 million people,  as per the government’s MSME registration portal, Udyam. 

However, despite their importance to the Indian economy, MSMEs often struggle against larger competitors due to limitations in terms of access to human resources, capital, and advanced technologies. 

Now, as the tentacles of artificial intelligence (AI) continue their endless crawl into every aspect of modern existence, MSMEs finally have a lever they can pull to bridge the gulf that exists between them and large businesses. Indeed, AI could represent a groundbreaking shift in business dynamics, offering unprecedented opportunities for competition, innovation, and growth. 

AI can provide MSMEs with a competitive edge by transforming their business landscape, simplifying current operations, and enabling them to enhance productivity, outreach, and scalability. It can assist them by automating tasks, optimising operations, and providing real-time data-driven insights. Additionally, AI can enable personalised customer experiences, targeted marketing strategies, predictive analytics for cash flow management, and efficient working capital management, further enhancing MSMEs’ ability to compete effectively and thrive in dynamic market environments.

The AI advantage for MSMEs

AI can have several pro-competitive effects for MSMEs, with typical use cases ranging from demand-side management to condition monitoring, predictive maintenance, quality management, production planning, production control, and supply chain management.