Mumbai: Small and medium enterprises (SMEs) in India are increasingly aware of the potential benefits of artificial intelligence (AI), yet many remain hesitant to adopt it. Their concerns are not unfounded. For business owners operating on tight margins, the promise of AI must be matched by clear, practical value. A report, 'Transforming Small Businesses: An AI Playbook for India’s SMEs', published by the World Economic Forum in collaboration with IndiaAI and the Office of the Principal Scientific Adviser, offers a detailed account of these concerns and outlines a framework to address them.
The report draws on extensive consultations with SME owners, entrepreneurs, industry bodies and government representatives. It reveals that while many SMEs are curious about AI, they lack the guidance to move forward. Owners often ask not what AI can do in theory, but what it can do for them specifically. They want to know which use cases are most relevant, how ready their business is, and where to find affordable solutions. Without answers to these questions, AI remains an abstract concept rather than a practical tool.
Cost is a major barrier. Many SME owners believe that AI solutions are designed for large enterprises and priced accordingly. They worry that customisation for small-scale operations is either unavailable or prohibitively expensive. As one manufacturer put it, “We need AI that plays by my margins because value is what keeps my lights on.” This sentiment is echoed across sectors, from textiles to automotive components. For SMEs, the cost of experimentation is high, and the risk of failure can be severe.
Another concern is the lack of implementation support. SME owners often feel they cannot adopt AI without expert guidance. They want professionals who can assess their operations, identify suitable processes for AI integration and help with deployment. However, hiring such experts is rarely feasible. The report suggests that a centralised AI platform could help bridge this gap by connecting SMEs with solution providers, equipment vendors and funding options. It also recommends showcasing successful early adopters to build trust and encourage broader uptake.
Digital readiness is another challenge. Many SMEs operate with minimal digital infrastructure. Their data is often recorded manually or stored in basic spreadsheets. Without reliable, structured data, AI systems cannot function effectively. The report highlights the need for foundational digital tools and training before AI can be introduced. It also notes that SMEs vary widely in their digital maturity, and any intervention must be tailored to their specific stage in the digital journey.
Workforce concerns further complicate adoption. Shopfloor workers often view AI as a threat to their jobs. They fear surveillance and replacement, and are unsure whether they can learn the necessary skills. The report emphasises the importance of responsible AI use and transparent communication. If workers see AI as a tool that simplifies tasks and enables upskilling, they are more likely to support its integration. Training programmes must be accessible and designed with the workforce in mind.
The role of government is critical. SME owners want the government to act as an ecosystem curator rather than just a subsidy provider. They call for platforms that facilitate knowledge-sharing, connect stakeholders and evaluate the effectiveness of AI solutions. Some also point to the reluctance of original equipment manufacturers (OEMs) to experiment with new processes. Without support from larger partners, SMEs struggle to implement AI even when they are willing.
Start-ups and industry representatives echo these concerns. They stress the need for AI solutions that are easy to integrate and tailored to Indian realities. Many SMEs lack the digital foundation required for advanced AI tools. Start-ups must meet each enterprise where it is, offering phased approaches and helping build basic capabilities. They also highlight the importance of clear goals. SMEs must define what they want to improve—whether it is reducing defect rates or shortening production times—before selecting tools.
The report proposes the IMPACT AI framework to accelerate adoption. It focuses on three pillars: awareness, action and recognition. Awareness involves bridging knowledge gaps and building trust. Action provides tools such as an AI maturity index and a solutions marketplace. Recognition celebrates early adopters to inspire others. This structured approach aims to guide SMEs through their AI journey, from initial curiosity to full integration.
Ultimately, the transformation of India’s SME sector through AI will require collaboration across stakeholders. Policy-makers must create enabling environments. Entrepreneurs must be willing to explore new technologies. Solution providers must offer affordable, relevant tools. And workers must be supported through training and transparent communication. The report does not promise quick fixes, but it does offer a realistic path forward—one that respects the constraints and aspirations of SMEs.
If AI is to serve inclusive growth, it must work not only for large enterprises but also for the millions of small businesses that drive India’s economy. By addressing their concerns with empathy and precision, stakeholders can help SMEs unlock the value of AI and build a more resilient, competitive future.
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