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Are you a tech enabler that is providing AI solutions for micro, small, or medium enterprises? Nominate yourself for the ET MSME Awards 2025 before August 31,2025!
Picture this: an auto parts manufacturing unit in Gurugram that’s stuck in a familiar trap, the kind where orders pile up while bank managers demand endless paperwork for working capital loans.
Then comes a breakthrough that changes everything: an artificial intelligence (AI)-enabled credit platform that approves the entrepreneur’s loan within just a few hours, based on their point-of-sale transaction data.
This is no hypothetical situation. Across India, banks, both private and public, are deploying algorithms that nearly double as relationship managers. AI is dismantling a significant barrier that has held back the country's 66 million-plus micro, small, and medium enterprises (MSMEs) for decades.
The transformation is most dramatic in credit access. AI-powered loan disbursals are based on decisions taken within minutes, with automated systems handling credit analysis and document checks, slashing processing times by days. Fintech platforms leverage point-of-sale (PoS) card swipe data to provide credit to MSMEs, offering businesses short-term unsecured loans monthly based on their PoS machine transactions for 18-36 months, going up to lakhs of rupees. What once required months of documentation now happens automatically as businesses conduct their daily operations.
The impact is staggering. According to a report by CRIF High Mark, credit to India’s MSME sector crossed ₹40 lakh crore as of March 2025, reflecting a 20% year-on-year growth.
But AI's reach extends far beyond financing. In June 2024, Meta and NASSCOM launched the ‘AI Enablement for MSMEs’ initiative, which validated what industry experts have long known: India's small business sector represents one of the world's largest untapped markets for AI transformation.
On factory floors across the country, small manufacturers are gradually discovering that intelligent automation doesn't require massive investments. For instance, textile units in Coimbatore can install computer vision systems for quality control at a fraction of what manual inspections cost. Such systems can accurately spot fabric defects, catching flaws that human eyes may miss during long shifts. Predictive analytics too can be deployed to optimise raw materials and prevent supply chain bottlenecks.
Manufacturing units that have adopted such technologies report shorter production cycles, better quality control, reduced wastage, and more agility in responding to market shifts. These gains are not only technological upgrades; they are redefining competitiveness for Indian industry in global markets.
Own or manage an Indian MSME? Register now for the ET MSME Awards 2025 and nominate yourself for one or more of our 22 categories.
Take Chennai's bustling industrial corridor, where small machine shops can use AI-powered sensors to predict when ageing Computer Numerical Control (CNC) machines need maintenance. These systems analyse vibration patterns, temperature fluctuations, and production data to schedule repairs during planned downtimes rather than costly emergency shutdowns.
The logistics revolution is equally transformative. Spice traders, for instance, can use AI route optimisation to coordinate deliveries across states. What once required hours of manual planning can now happen automatically, taking into consideration traffic patterns, fuel costs, and delivery priorities. This translates to shipping more orders with the same fleet. AI models can also predict which logistics operators will deliver the fastest, with the least risk of return to origin.
MSMEs in the food processing sector too can use AI to their advantage. Pickle manufacturing units may use machine learning to optimise flavour profiles based on regional preferences, sales data, seasonal variations, and customer feedback to suggest recipe modifications. The outcome could be increased sales in targeted markets.
Even traditional service businesses are finding AI applications. A small accounting firm in Pune, for example, may use natural language processing to automatically categorise expenses and flag potential tax deductions in client documents. What previously required junior accountants to manually review thousands of receipts now happens instantly.
The common thread across these scenarios isn't cutting-edge technology, but practical problem-solving. Businesses aren't considering AI for its own sake; they're considering it to solve specific operational challenges that have constrained growth for years. MSMEs need tools that solve real concerns such as credit access, cash flow, quality control, and operational efficiency. The best AI implementations are almost invisible: they just make everything work better.
The Centre too is taking notice. Recent policy initiatives recognise AI's potential to level the playing field between large corporations and small businesses. Unlike previous technology waves that often favoured enterprises with substantial IT budgets, AI tools are increasingly accessible through cloud platforms and subscription models.
Consider the math: a chemical manufacturer can implement swift, quality inspection AI for less than ₹30,000 monthly. A logistics company can access route optimisation for the cost of fuel savings in the first month.
As MSMEs are discovering with swift loan approvals, AI isn't about replacing human judgement, but about augmenting capabilities. Businesses still rely on relationships, craftsmanship, and local market knowledge. Now, those strengths are amplified by algorithms that handle routine decisions faster and more consistently than humans ever could.
All that said, the journey isn't without obstacles. Indian MSMEs still lag global benchmarks in AI adoption, but experts say affordable solutions can boost productivity by 30%. This gap represents both a challenge and an enormous opportunity. Countries like China and South Korea have seen small businesses achieve remarkable efficiency gains through AI adoption, which suggests that India's MSMEs are sitting on untapped potential.
The real story of AI in India's MSME sector will be technological empowerment on the ground. After decades of being technology takers, small businesses are gradually becoming intelligent users of sophisticated tools, competing not just on cost and relationships, but on operational excellence powered by emerging technologies.
The ET MSME Awards 2025, which has IDBI Bank as banking and lending partner, is open for nominations. Register before August 31, 2025.
Picture this: an auto parts manufacturing unit in Gurugram that’s stuck in a familiar trap, the kind where orders pile up while bank managers demand endless paperwork for working capital loans.
Then comes a breakthrough that changes everything: an artificial intelligence (AI)-enabled credit platform that approves the entrepreneur’s loan within just a few hours, based on their point-of-sale transaction data.
This is no hypothetical situation. Across India, banks, both private and public, are deploying algorithms that nearly double as relationship managers. AI is dismantling a significant barrier that has held back the country's 66 million-plus micro, small, and medium enterprises (MSMEs) for decades.
The transformation is most dramatic in credit access. AI-powered loan disbursals are based on decisions taken within minutes, with automated systems handling credit analysis and document checks, slashing processing times by days. Fintech platforms leverage point-of-sale (PoS) card swipe data to provide credit to MSMEs, offering businesses short-term unsecured loans monthly based on their PoS machine transactions for 18-36 months, going up to lakhs of rupees. What once required months of documentation now happens automatically as businesses conduct their daily operations.
The impact is staggering. According to a report by CRIF High Mark, credit to India’s MSME sector crossed ₹40 lakh crore as of March 2025, reflecting a 20% year-on-year growth.
But AI's reach extends far beyond financing. In June 2024, Meta and NASSCOM launched the ‘AI Enablement for MSMEs’ initiative, which validated what industry experts have long known: India's small business sector represents one of the world's largest untapped markets for AI transformation.
On factory floors across the country, small manufacturers are gradually discovering that intelligent automation doesn't require massive investments. For instance, textile units in Coimbatore can install computer vision systems for quality control at a fraction of what manual inspections cost. Such systems can accurately spot fabric defects, catching flaws that human eyes may miss during long shifts. Predictive analytics too can be deployed to optimise raw materials and prevent supply chain bottlenecks.
Manufacturing units that have adopted such technologies report shorter production cycles, better quality control, reduced wastage, and more agility in responding to market shifts. These gains are not only technological upgrades; they are redefining competitiveness for Indian industry in global markets.
Own or manage an Indian MSME? Register now for the ET MSME Awards 2025 and nominate yourself for one or more of our 22 categories.
Take Chennai's bustling industrial corridor, where small machine shops can use AI-powered sensors to predict when ageing Computer Numerical Control (CNC) machines need maintenance. These systems analyse vibration patterns, temperature fluctuations, and production data to schedule repairs during planned downtimes rather than costly emergency shutdowns.
The logistics revolution is equally transformative. Spice traders, for instance, can use AI route optimisation to coordinate deliveries across states. What once required hours of manual planning can now happen automatically, taking into consideration traffic patterns, fuel costs, and delivery priorities. This translates to shipping more orders with the same fleet. AI models can also predict which logistics operators will deliver the fastest, with the least risk of return to origin.
MSMEs in the food processing sector too can use AI to their advantage. Pickle manufacturing units may use machine learning to optimise flavour profiles based on regional preferences, sales data, seasonal variations, and customer feedback to suggest recipe modifications. The outcome could be increased sales in targeted markets.
Even traditional service businesses are finding AI applications. A small accounting firm in Pune, for example, may use natural language processing to automatically categorise expenses and flag potential tax deductions in client documents. What previously required junior accountants to manually review thousands of receipts now happens instantly.
The common thread across these scenarios isn't cutting-edge technology, but practical problem-solving. Businesses aren't considering AI for its own sake; they're considering it to solve specific operational challenges that have constrained growth for years. MSMEs need tools that solve real concerns such as credit access, cash flow, quality control, and operational efficiency. The best AI implementations are almost invisible: they just make everything work better.
The Centre too is taking notice. Recent policy initiatives recognise AI's potential to level the playing field between large corporations and small businesses. Unlike previous technology waves that often favoured enterprises with substantial IT budgets, AI tools are increasingly accessible through cloud platforms and subscription models.
Consider the math: a chemical manufacturer can implement swift, quality inspection AI for less than ₹30,000 monthly. A logistics company can access route optimisation for the cost of fuel savings in the first month.
As MSMEs are discovering with swift loan approvals, AI isn't about replacing human judgement, but about augmenting capabilities. Businesses still rely on relationships, craftsmanship, and local market knowledge. Now, those strengths are amplified by algorithms that handle routine decisions faster and more consistently than humans ever could.
All that said, the journey isn't without obstacles. Indian MSMEs still lag global benchmarks in AI adoption, but experts say affordable solutions can boost productivity by 30%. This gap represents both a challenge and an enormous opportunity. Countries like China and South Korea have seen small businesses achieve remarkable efficiency gains through AI adoption, which suggests that India's MSMEs are sitting on untapped potential.
The real story of AI in India's MSME sector will be technological empowerment on the ground. After decades of being technology takers, small businesses are gradually becoming intelligent users of sophisticated tools, competing not just on cost and relationships, but on operational excellence powered by emerging technologies.
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( Originally published on Aug 19, 2025 )
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