Policy Plunge

MSMEs Must Figure More In Discussions On AI; Govt Can Lend A Helping Hand

MSMEs being empowered to ride the AI wave can help them reap huge gains on the productivity front, increase their business competitiveness, and enable them to generate more and better-quality jobs

Amidst all the talk on artificial intelligence and how it can significantly improve productivity and move the needle on GDP growth, it is essential that India takes tangible, proactive measures to ensure that its micro, small and medium enterprises (MSMEs) segment can ride the AI wave to touch new heights and can contribute more effectively to the realisation of multiple national objectives.

A huge job generator, MSMEs form a key pillar of India’s economy. Before Covid-19, the MSMEs had a 41 per cent share in the country’s manufacturing output and a little over 30 per cent in the gross domestic product (GDP). Both numbers slipped a bit during the pandemic, which took a bigger toll on small and medium enterprises compared to large firms.

Likewise, the share of MSMEs in total merchandise exports fell from 49.8 per cent in 2019-2020 to 43.6 per cent in 2022-23. In fact, a deceleration in exports from the MSME sector has been a factor in keeping overall exports growth sluggish in recent years.


Notwithstanding the critical contribution of MSMEs to India’s economy, not enough attention has been paid to leveraging artificial intelligence to further enhance the vibrancy of this segment, raise its business competitiveness, and ensure that it can create new and better-quality jobs for the growing Indian workforce.

At a broader level, greater adoption of artificial intelligence by MSMEs can translate into India emerging stronger to maximise the gains from AI, besides providing an impetus to signature missions like ‘Digital India’ and fast-tracking the Viksit Bharat (developed India) goals.

MSMEs Need Government Help

Artificial intelligence can help MSMEs reap huge gains on the productivity front by helping them undertake better marketing and customer services and improve their supply chain management. MSMEs can leverage AI to maintain consistent quality and timely delivery of products and services, and thus become more resilient.

As a McKinsey studynoted, AI can address “specific business challenges in ways that produce one or more measurable outcomes. Examples include generative AI’s ability to support interactions with customers, generate creative content for marketing and sales, and draft computer code based on natural-language prompts, among many other tasks.”

India’s MSMEs being left to fend for themselves when it comes to AI – where advancements in technology take place at breakneck speed – under the assumption that the segment can take care of itself on this score is a step fraught with risk.

It may result in this hugely promising arena – most of whose constituents face financial constraints in being able to hire Chief AI Officers or engage high-profile consultancy firms to prepare an AI roadmap for their operations – losing out on much of its business edge. In a worst-case scenario, it can even threaten the survival of many micro units operating in the smaller towns and cities of the country.

Scope Of Assistance

As part of its handholding efforts on the AI issue, the Ministry of Micro, Small & Medium Enterprises can take the initiative to step up its engagement with MSMEs across sectors and geographies to gauge their understanding of AI and the likely impact that the tech could have on their businesses. Embarking on such a step could help the MSME Ministry assess the state of AI readiness of various sub-sectors within the MSME fold, a crucial prerequisite for formulating any form of policy support.

The MSME ministry could also increase its interactions on AI-related issues with the Ministry of Electronics and Information Technology (MeitY), Niti Aayog, and leading industry bodies like Ficci, CII, Assocham, Nasscom, etc., to find out how micro, small, and medium enterprises can leverage sophisticated artificial intelligence technologies to emerge as stronger outfits.

Moreover, an independent study could be commissioned to evaluate the opportunities and challenges that AI can pose to various sub-segments of the MSME arena and come up with suitable recommendations keeping the Indian context in mind.

On its part, the Ministry of Finance could explore whether it is possible to provide some form of financial incentive to MSMEs that meet certain defined performance criteria if these enterprises are keen to increase their AI usage. The Ministry of Skill Development and Entrepreneurship could develop AI-related skill development modules specifically aimed at all those running micro-enterprises as proprietorship entities.

However, it is not just the government that can help MSMEs on the AI issue. India Inc can also play an active role in this connection. Some of the ways through which big businesses can do this are by organising workshops on AI for their MSME suppliers, keeping them updated about the latest happenings on the AI front, etc. Large companies may also reimburse select MSME partners for the training costs involved in the latter providing AI-related skills to their staff.

Ultimately, for AI to become a movement in India, the talk around the technology needs to move beyond conglomerates, large standalone companies, and those engaged in the tech arena.

Given their pivotal contribution to the country’s growth and development, it is only fair that MSMEs find a bigger place in discussions on artificial intelligence as that would also be in keeping with the Sabka Vikas (development for all) agenda.

(The author is a current affairs commentator. Views expressed are personal)

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