With the right combination of digital infrastructure, financial support, and capability building, MSMEs can dramatically expand their contribution to the country’s GDP, exports, and job creation
As artificial intelligence, automation, and cloud technologies become more accessible, even the smallest enterprises can reimagine their operations, improve productivity, and serve across markets with agility | Photo Credit: PICHUMANI K
India’s Micro, Small, and Medium Enterprises (MSMEs) have long been recognised as the backbone of the nation’s economy. They contribute a substantial share of the country’s overall economic output and act as one of the largest creators of livelihoods across urban and rural India. Their widespread presence and deep economic linkages make them central to driving inclusive growth. Be it a food-processing unit in Assam, a handicraft cluster in Rajasthan, or a logistics startup in Bengaluru, MSMEs bring opportunities closer to communities. Beyond direct employment, MSMEs stimulate entrepreneurship, often creating an ecosystem of suppliers, transporters, and retailers around them, generating a multiplier effect of job creation. As India advances toward its “Viksit Bharat 2047” vision, MSMEs are poised to assume an even more pivotal role in shaping the nation’s economic transformation.
Transformation through digitalisation
Most of this transformation will be propelled by the deployment of digital tools across public and private enterprises. As artificial intelligence, automation, and cloud technologies become more accessible, even the smallest enterprises can reimagine their operations, improve productivity, and serve across markets with agility.
From our experience working directly with MSME entities, we have seen how AI-enabled tools are already helping small manufacturing units optimise supply chains, predict stock shortages, and improve fulfilment accuracy. Similarly, cloud-based solutions are offering flexibility and security while removing infrastructure barriers. These technologies are levelling the playing field for MSMEs that previously lacked access to enterprise-grade digital infrastructure.
However, India’s MSME ecosystem is deeply rooted in Tier 2 and Tier 3 cities, where digital literacy gaps, limited infrastructure, and restricted access to finance remain key challenges. For digital transformation to succeed at scale, a collaborative approach is imperative whereby policymakers, industry leaders and technology providers work in unison to offer financial incentives, augment digital infrastructure and expand digital upskilling programmes for MSMEs. Only then can MSMEs fully harness the benefits of emerging technologies.
Technology as a leveller
Technology adoption is essential in addressing the structural imbalance between MSMEs and large enterprises. Large enterprises, despite employing only a small share of the workforce, account for a disproportionately high share of India’s economic output. MSMEs, on the other hand, employ the vast majority of workers yet contribute significantly less to overall economic value, highlighting the productivity gap that strategic digital adoption can help bridge. But because MSMEs are a diverse and heterogeneous group, what works for a small textile maker may not work for a regional logistics firm or a healthcare centre. Therefore, technology solutions need to be tailored to their specific needs.
To maximise the impact of technologies such as AI, MSMEs must first strengthen foundational capabilities by reimagining their business with customer at the core, digitising processes, standardising data systems, and training teams to utilise digital tools effectively. AI is not a plug-and-play solution; it works best when integrated with core operations and supported by a data-ready environment. A shop-floor manufacturing unit may use AI to predict equipment failures, whereas a local retail MSME may use AI-driven insights to identify their most profitable SKUs or improve demand forecasting. In both cases, digitalisation is the prerequisite for AI readiness.
Customised solutions for MSMEs
Creating such readiness requires customised solutions that balance affordability with impact. This is where technology and telecom service providers play a crucial role. Bundled offerings that combine reliable connectivity, cloud access, and AI-driven business tools can help MSMEs adopt technology without heavy upfront investments. Subscription-based models are already easing adoption barriers and encouraging smaller enterprises to experiment, scale, and refine their digital journeys.
Early adopters across sectors are demonstrating that meaningful transformation doesn’t always require vast infrastructure. Manufacturers using IoT-enabled predictive maintenance are reducing downtime significantly, optimising their supply chains. Healthcare enterprises are adopting AI-assisted diagnostics and cloud-based record systems to increase efficiency. Fintech innovators using machine learning are facilitating faster, more inclusive access to credit for small businesses. These examples illustrate that when equipped with the right tools and training, MSMEs can harness AI for a long-term enterprise edge.
The cloud advantage
Likewise, cloud tools are revolutionising MSME operations in India, not just as infrastructure but also as a platform and for applications, enabling them to innovate, scale, and operate confidently in an increasingly digital landscape. According to the SME Digital Insights Study, half of Indian MSMEs now prioritise cloud adoption to expand operations, driven by enhanced security and improved customer centricity. Nearly 20 per cent have already migrated more than half of their workloads to the cloud, a clear proof of their commitment to digital transformation.
Cloud-based ERP systems exemplify this shift by integrating production, supply chain, inventory, finance, and sales into a single platform, giving business leaders real-time visibility and control. With pay-as-you-go flexibility, MSMEs avoid heavy upfront investments while strengthening data security, enabling remote access, and accelerating decision-making. For instance, a leading luggage manufacturer unified its fragmented communication channels using CPaaS, significantly improving customer support and response times. Similarly, a global wellness solutions company streamlined cross-border collaboration with UCaaS, integrating voice, messaging, and video into one secure ecosystem. These cases show how cloud-powered workflows help MSMEs build resilience, deliver superior customer experiences, and operate efficiently at scale.
Making MSMEs future-ready
As India advances into a digital-first era, MSMEs must prioritise workforce upskilling. Continuous learning is no longer optional; it is essential for staying relevant. Transformative technologies AI, cloud, and automation tools will only deliver value if employees know how to use them effectively. MSME leaders, too, must undergo a mindset shift from survival mode to transformational growth, from manual processes to intelligent workflows, and from local markets to digital marketplaces. Large-scale public-private partnerships can accelerate this transition by expanding access to training, funding, mentorship, and technology platforms tailored to MSME needs.
With the right combination of digital infrastructure, financial support, and capability building, MSMEs can dramatically expand their contribution to the country’s GDP, exports, and job creation. This sector holds the power to absorb India’s growing workforce, drive inclusive development across small towns and cities, and fuel national economic resilience. But the window of opportunity is time sensitive as global competition is intensifying, and technology adoption cannot be deferred. MSMEs and other stakeholders must get their act together now so that India can fully leverage the sector’s enormous potential for a higher growth trajectory.
The writer is Managing Director, Tata Teleservices
Published on January 4, 2026
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