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Digital Divide: MSMEs struggle to tap into AI revolution as high costs block access
iStock MSMEs need cost-effective AI solutions that minimise infrastructure costs and offer affordable implementation and maintenance. This would enable them to leverage AI without straining their limited budgets, say experts and stakeholders.
Even as more and more businesses are embracing artificial intelligence (AI), micro-, small-, and medium-sized enterprises (MSMEs) in the country face challenges in adopting AI solutions due to financial constraints, including the high costs of infrastructure, tools, and training. Additionally, budget limitations contribute to the perception that AI investments are expensive and need cost-effective AI solutions that minimise infrastructure costs and offer affordable implementation and maintenance. This would enable them to leverage AI without straining their limited budgets, say experts and stakeholders.'The answer lies in modular, cloud-native enterprise architecture built for constraint. MSMEs can bypass heavy infrastructure costs by using scalable, pre-trained AI services on pay-as-you-go cloud platforms,' says Ashutosh Ahuja, an enterprise and solution architecture expert with a focus on is a need for decentralised models that allow targeted, low-risk adoption, and the approach doesn't just reduce cost but makes AI truly accessible to small and medium businesses, adds say that the MSMEs should start with a clear enterprise blueprint that aligns AI investments with specific business outcomes.
India's AI adoption rates in manufacturing are relatively low—less than 25% in organised manufacturing and around 15% in the case of MSMEs, according to data shared by the Bangalore Chamber of Industry and Commerce (BCIC) during a summit in April this year. On the other hand, economies such as China, Germany, and the US have AI adoption rates of 35-40% in manufacturing. Experts say pricing plays a critical role in restricting the adoption in India.A study by the Institute for Competitiveness for NITI Aayog found that 59% of India's MSMEs struggle to invest in AI due to the high costs of tools, infrastructure, and training. Also, 91% of MSMEs believe AI should be democratically available and affordable. The study recommended providing financial support through subsidies, grants, and low-interest loans. However, the report lacked specifics on the extent of support, eligibility criteria (whether all MSMEs or a select group) and interest rate details for the the uninitiated, according to Union Budget 2025, MSMEs with investments up to Rs 2.5 crore will now be classified as microenterprises, an increase from the previous threshold of Rs 1 crore; firms with investments up to Rs 25 crore will be known as small enterprises, up from Rs 10 crore; and MSMEs with investments up to Rs 125 crore will now be recognised as medium enterprises, a rise from the earlier limit of Rs 50 crore.
Few critical factors impacting adoption are awareness, long lead time to value realisation and cost of ownership, says Kamesh Srinivasan, Partner-Digital Lighthouse, KPMG in India.
'While an industry-led consortium around home-grown foundational models will surely ease the cost pressure, additionally, awareness of AI, a platform-led approach to adoption and a low-entry barrier to value realisation will pave the way for a robust AI-driven MSME industry,' adds Srinivasan. Experts say that major AI models from abroad are often inaccessible to small businesses due to high membership fees and pay-use costs, which creates a barrier for MSMEs to leverage AI technologies.
Jaydeep Birje, CEO of Leo Engineers, also believes that AI adoption remains a challenge for MSMEs due to the perceived complexity and cost. However, Birje also says that there are cost-effective and phased approaches that MSMEs can adopt. 'Instead of full-scale AI integration, MSMEs should begin with narrow AI applications that solve specific pain points, like demand forecasting, predictive maintenance, chatbots for customer service and invoice processing and automation,' adds Birje. Experts also suggest that MSMEs should look at leveraging the government initiatives like SAMARTH Udyog Bharat 4.0 and Digital MSME Scheme, as these schemes offer technical support and financial assistance to help them adopt Industry 4.0 technologies, including AI.'Collaborating with AI start-ups, research labs, or academic institutions can give MSMEs access to innovation at low cost, often through pilot projects or joint R&D. Instead of hiring expensive AI experts, MSMEs can upskill existing employees through affordable online training. This builds in-house capability over time,' says Birje.
Managing the cost of AI To make AI financially viable, MSMEs must treat it as a strategic investment, not a cost centre. Experts say that MSMEs should be wiser while availing AI cloud-based AI services typically offer subscription or usage-based pricing, which avoids large upfront capex and spreads costs over time. Also, instead of building custom models from scratch, MSMEs can use pre-built AI models for common functions like language processing, image recognition, or analytics, reducing development time and cost, they suggests prioritising AI projects that show tangible return on investment, either through cost savings, efficiency improvement, or customer retention. 'This justifies the expense and builds internal confidence,' he into incubators, accelerators, or industrial clusters backed by governments and private players can help MSMEs gain subsidised access to AI tools and mentorship, experts suggest.
On the occasion of World MSME Day on June 27, 2025, ET Digital will also open registrations for its sixth edition of the ET MSME Awards 2025. The coveted award programme celebrates India's top MSMEs for their achievements and contribution to the nation's economic development.
