AI for All: Why MSMEs Are the Real Winners of the Automation Revolution

For MSMEs today, the way business runs has completely changed. What once depended on manual records, phone calls and in-person negotiations has now moved into a digital space where everything is faster and easier to manage.

With AI-powered tools becoming accessible and affordable, small businesses can now track sales in real time, automate inventory, improve customer service and even forecast demand without needing complex systems or large teams.

This shift isn’t just a technological upgrade. It’s a levelling of the playing field. MSMEs and not large corporations are turning out to be the biggest winners of this digital and AI wave.

The power and reach of MSMEs in India

MSMEs form the backbone of India’s economy. They remain one of the biggest employers, particularly outside agriculture, and they contribute significantly to GDP, industrial output and exports.

Over recent years, the government has emphasised the digitisation and formalisation of small businesses. And due to this initiative, more enterprises are registering under the Udyam Portal, accessing credit, subsidies and support schemes.

That foundation makes MSMEs especially well-positioned to benefit from what automation and AI bring to the table.

From digital tools to AI tools, the adoption is growing

A recent industry survey shows that around 67% of Indian MSMEs are now “digitally equipped”, which means they are using tools such as ERP, cloud services, CRM and even IoT and AI in some cases. These are not just tech-savvy startups. These are everyday small businesses, including retailers, manufacturers, and service providers, that are leveraging technology to get faster and more efficient.

Of the firms surveyed, around one in three reported tangible improvements in efficiency or business growth after going digital. That means lower costs, quicker service, fewer mistakes and happier customers.

Early adoption of AI and analytics tools among MSMEs may still be modest, but the promise is already visible. Automation, predictive analytics, digital payments, and smart supply-chain tracking help level the playing field with larger players.

Government initiatives are giving small business owners a real boost

Tech alone can’t do everything, so supportive policy helps.

• The MSME‑TEAM Initiative was launched in 2024 to help up to 5 lakh micro and small enterprises join digital commerce networks such as Open Network for Digital Commerce (ONDC). Half of those beneficiaries are meant to be women-owned enterprises.
• Through this initiative, MSMEs receive support for catalogue creation, logistics, packaging and digital onboarding, essentially the obstacles that once discouraged small sellers from going online.
• Once onboarded, many MSMEs see real gains. Several reports from 2025 note that MSMEs in Tier II/III cities witnessed around 20% revenue surge after joining ONDC.

When initiatives like these are combined with public infrastructure such as UPI payments, digital identity verification, simplified registration, and easier access to credit, they open up remarkable opportunities for small businesses across India.

What AI and Automation bring to MSMEs

Here’s why small businesses stand to gain the most from automation and AI:

• Lower costs and better efficiency: Automated bookkeeping, inventory management and predictive ordering reduce waste and human error. That saves money and time.
• Smarter decision-making through data: Even small retailers can now track customer buying patterns, seasonal demand, and stock turnover rates. AI-powered analytics help forecast demand and adjust inventory, which is a big advantage over manual guesswork.
• Access to wider markets, without big budgets: With platforms like ONDC, MSMEs can reach customers beyond local markets. AI-powered digital marketing, catalogue management and logistics planning make this possible even for very small units.
• Faster access to capital and credit: Some AI-based lending tools evaluate MSMEs not just on past loans, but on real-time data like sales records, GST returns and UPI flows. That increases the chances of approval and the speed of credit.
• New jobs and upskilling: Automation doesn’t just replace work, but it creates new kinds of jobs. Staff who used to manage ledgers can now handle customer relationships, quality control, shipping, or digital storefronts. It adds value and not just cuts costs.
• Sustainability and resilience: With more organised operations, less wastage, efficient logistics and better supply chains, MSMEs can operate sustainably. In a country like India, where demand and supply can fluctuate drastically, tech adoption brings resilience.

A few tough realities, but nothing that can’t be handled

Of course, the shift isn’t always easy. Many MSMEs still rely on traditional processes. Some lack digital literacy. Others are sceptical about investing in tech or fear data privacy.

Access to capital and a skilled workforce can still be a hurdle, especially for very small or rural enterprises. But with government schemes, growing digital infrastructure, and falling cost of digital tools, these challenges are slowly shrinking.

The bigger picture: MSMEs and India’s growth journey

As India aims to become a globally competitive economy, MSMEs will play a key role. A digitised, AI-ready small-business sector offers inclusive growth, employment opportunities and more balanced regional development.

Automation is no longer just “tech for the rich.” It’s becoming “tech for every shop, every store, every small factory.” It’s transforming the backbone of our economy, the MSMEs.

If you run or plan to start a small business, this is a moment to explore. With the right tools, support and mindset, automation and AI can equip you to compete, to scale, to thrive.