India's MSMEs embrace AI, but can they turn adoption into productivity gains?

India's micro, small and medium enterprises (MSMEs) are increasingly adopting Artificial Intelligence (AI), but translating experimentation into measurable productivity gains remains a challenge, according to multiple industry experts.

A Confederation of Indian Industry (CII)–Indian School of Business (ISB) study found that 65.8% of surveyed MSMEs used AI tools, while only 21% used enterprise resource planning (ERP) or customised business software to manage operations. Separately, PHDCCI cited research indicating that 79% of Indian small and medium enterprises were investing in AI in some form.

However, deployment remains limited. Dun & Bradstreet India's 2026 MSME study found that 76% of 210 MSME leaders surveyed used AI, but only 5% had made it central to their operations. PHDCCI also cited an October 2026 Adobe report, according to which only 6.7% of Indian enterprises had scaled AI across multiple workflows, while 40% remained in the pilot phase for agentic AI.

Akshay Garkel, Partner and Leader – Cyber at Grant Thornton Bharat, said AI could help MSMEs automate customer servicing, order processing, inventory management and accounting, allowing them to handle higher volumes without proportionately increasing headcount. Yet affordability, fragmented data and limited skills continue to constrain adoption.

Manu Gupta, Managing Partner, and Kanika Bali, Tax Partner at UK-headquartered accounting, business and tax advisory firm Optimyze Finance LLP, said AI adoption was largely driven by individual employees rather than integrated into core operating systems. They cautioned that time saved does not automatically translate into lower costs or higher profits.

PHDCCI cited a July 2026 Google–India MSME Forum report projecting that AI adoption could unlock more than $490 billion in economic value for Indian MSMEs. It also highlighted reported operational cost reductions of 20–30% in early AI deployments, although such gains are not necessarily representative of the wider sector.

Abhijeet Kate, Co-Founder and Principal Consultant at digiCloud Solutions, said businesses needed to embed AI into existing workflows. “The biggest barrier is rarely the AI itself. It is the state of the business around it,” he said.

Vishal Devanath, Co-Founder and CEO of SMERGERS, said the share of Indian business listings mentioning AI on its platform rose from 2.3% in 2023 to 4.3% in 2026. He cited an embroidery software firm that reported reducing design time from 24 hours to 15 minutes.

Rananjay Singh, COO of Enso Group, a diversified global conglomerate with interests in natural resources, energy and international trading, said businesses should measure AI through operating costs, turnaround times and revenue.

For India's MSMEs, the challenge is to move beyond experimentation and demonstrate sustainable, measurable productivity gains.