Start Small, Think Big: Leveraging AI to transform the future of the MSME sector

Abstract

Micro, Small and Medium _ Enterprises (MSMEs) are a significant component of the Indian economy owing to the fact that it is the second-largest employment provider, after agriculture in India. Currently, there are 63 million such enterprises in various industries employing close to 124 million people, accounting for 8% of India’s GDP and 45% of merchandise exports. Hence, this sector is justifiably called the growth engine of the nation. The MSME sector in India consists of 99.4% Micro Enterprises, 0.52% Small Enterprises and 0.08% Medium Enterprises. These enterprises are broadly classified into two categories namely, Recently, the Government of India has updated the definitions of MSMEs (see table). The revised definition is thought to be in favor of MSMEs. This is because earlier, firms tried to operate conservatively owing to the fear that if they outgrow the size of what has been defined as an MSME, they would not be entitled to the benefits provided by the government. With the revised definition, they need not worry about growing in size and still avail benefits. It has been estimated that an investment of one lakh in fixed assets in the small scale sector, on an average generates employment for four people. Besides providing large employment opportunities at lower cost of capital, MSMEs help industrialize the backward & rural areas alleviating the regional imbalances and moving towards uniform distribution of value and wealth. The current article enunciates the “applications of AI in MSME businesses” to significantly boost their performance by anchoring the potential of AI. Before moving on to the applications of AI in various industries of MSME, lets understand the strengths, weaknesses, opportunities and threats these businesses face (see table in the next page).