Unlocking a $500 Billion Opportunity: The Role of AI in India’s  MSMEs 

Artificial Intelligence (AI) holds the promise of becoming a significant catalyst for growth  in India’s economy, particularly within the Micro, Small and Medium Enterprises (MSME)  sector. A recent report suggests that embracing AI across India’s 64 million MSMEs  could unleash economic potential exceeding $500 billion. However, to fully harness this  opportunity, India must transition from an “adopt-first” approach to an “invent-first”  mindset that fosters deeper innovation. 

The report, titled “India’s Triple AI Imperative: Succeeding with AI in India,” has been  collaboratively published by BCG X—the technology, design, and innovation branch of  the Boston Consulting Group—and the Federation of Indian Chambers of Commerce &  Industry (FICCI). It underscores that while India is among the fastest-growing AI markets  worldwide, it still grapples with the challenge of converting AI adoption into substantial  economic value. 

MSMEs: An Underexplored AI Frontier 

A pivotal insight from the report is the vast, yet largely untapped, potential of AI within  the MSME landscape. With millions of small enterprises operating in sectors like  manufacturing, services, retail, and agriculture, AI has the potential to greatly increase  output, reduce operating expenses, and facilitate formal loan availability. Collectively,  these advancements could generate over $500 billion more in economic worth. 

Despite this potential, MSMEs encounter numerous obstacles to AI adoption. obstacles  including poor digital infrastructure, restricted awareness of AI applications, and a lack 

of skilled talent remain significant hurdles. For AI to work, these holes must be filled to  extend its benefits beyond large corporations and startups, thereby fostering inclusive  growth. 

From Adoption to Innovation in AI 

The report highlights a notable disparity in India’s AI trajectory. While the country ranks  among the top quartile globally in AI readiness, it contributes less than 1% of AI patents  worldwide. This suggests that India is primarily consuming AI technologies rather than  innovating them. 

Experts involved in the study advocate for a shift in focus from merely using AI to  address isolated issues to establishing “AI-first” organisations. This entails rethinking  processes, products, and operational models around AI, rather than viewing it as just a  supplementary tool. 

FICCI Director General Jyoti Vij stressed that India’s true strength lies in its scale and  inclusivity. By facilitating AI adoption across MSMEs, startups, and regional ecosystems,  the nation can enhance productivity, create quality employment opportunities, and  bolster long-term socio-economic resilience. 

Bridging Investment Gaps for Value Realisation 

Another critical issue raised in the report is the gap between action and intention. Nearly 44% of senior executives still allocate less than 10% of their funds for technology  to AI initiatives. Consequently, only about a quarter of organisations are currently able  to derive meaningful value from their AI investments. 

Nipun Kalra, Managing Director and Senior Partner at BCG, noted that genuine value  from AI will only materialise when companies commit to profound innovation and  inclusive access, rather than confining AI to incremental enhancements. 

AI’s Evolving Role in the Future Workplace 

Looking ahead, the report anticipates a significant transformation in business  operations. By 2026, AI is expected to take the lead in executing specific tasks,  potentially managing 70–80% of routine activities and 30–50% of reasoning-based  tasks. 

If this transition is effectively managed, it could redefine productivity and  competitiveness across Indian enterprises—especially MSMEs—positioning AI as a  fundamental element of India’s future economic growth.