New Delhi, Jun 27 (KNN) Adoption of artificial intelligence (AI) and digital tools for day-to-day operations would power the next level of growth for micro, small and medium enterprises (MSMEs) in India, said executives of fintech and MSME-focussed firms.
The executives also emphasised on awareness among MSMEs about initiatives like Government eMarketplace (GeM) and open network for digital commerce (ONDC) for accelerating transition from micro to small and from small to medium enterprises.
“With lean teams, 70% of MSME owners spend their days firefighting. AI can reclaim that time by automating collections, reconciliation, and fraud prevention, complex workflows that previously required entire teams,” said Akash Sinha, Co-founder & CEO, Cashfree Payments.
Going Digital Pays
The Cashfree founder stressed on getting more MSMEs to do digital commerce. He noted that small and medium businesses which adopt digital commerce scale from small to mid-market in just 18-24 months.
“We need to boost awareness for initiatives like GeM and ONDC to make this accessible to everyone. The second is exposing MSMEs to cross-border commerce. The new PA-CB (Payment Aggregator-Cross-Border) has made global commerce seamless for internet-first SMBs, yet awareness remains low. The impact of it is significant. Merchants using our international gateway report revenue growth of up to 30%,” Sinha said.
MSMEs Struggle To Scale Up
While the number of MSMEs in the country has grown over the years, many of them struggle to transition from micro to small and from small to medium enterprises.
As per the central government’s Udyam portal, only 0.4% of micro-enterprises make the jump to small, and only 0.05% of small businesses scale to medium.
Anand Kumar Bajaj, Founder, MD & CEO, PayNearby said that the next leap for MSMEs will come from helping them move from informal resilience to formal, scalable growth.
“This means making digital tools simpler, credit more accessible, and assisted support more available at the last mile,” he said.
7.69 Crore MSMEs on Udyam
MSMEs account for about 31.1% India’s gross domestic product (GDP), 35.4% of manufacturing output and 48.58% of the country’s exports. They together employ around 32.82 crore persons. More than 7.69 crore enterprises are registered on the Udyam portal.
While MSMEs have played crucial role in economic growth they face multiple challenges such as access to formal credit, availability of trained manpower, outdated technology and inability to avail benefits of various government schemes. Poor access to formal channels of credit is seen as a major obstacle for the MSME sector.
Credit Is Crucial
Pallavi Shrivastava, Co-Founder, Progcap (an MSME fintech) said that India must build a credit infrastructure tailored to the modern MSME.
“The traditional banking system struggles to address the Rs 30 lakh crore MSME financing gap due to rigid collateral requirements. Today’s global economic volatility and supply chain disruptions are severely stretching working capital cycles for Tier-II and Tier-III enterprises. The solution isn’t just more credit—it is smarter, embedded credit,” she noted.
Sumit Kumar, Founder & Director, Headsup B2B highlighted that the next phase of MSME growth will depend not only on increasing access to capital but also on reducing the friction associated with doing business.
“Fragmented supplier networks, procurement inefficiencies, delayed payments, and limited visibility into new business opportunities continue to impact productivity and growth. Addressing these challenges can unlock substantial economic value and help MSMEs transition from small enterprises into nationally competitive businesses,” he said.
MSMEs in AI Era
Kartik Narayan, CEO, Apna Jobs said that India’s MSMEs are entering an AI era.
“The 164% growth in demand for AI-related skills shows that artificial intelligence is rapidly moving from experimentation to everyday business use. For workers, AI literacy is becoming an employability skill. For small businesses, AI is becoming a productivity and hiring tool. Historically, many MSMEs could not afford large HR teams or specialist recruiters,” he said.
Apna CEO highlighted that AI is helping change that by giving small businesses access to capabilities that were once available only to larger enterprises- from candidate sourcing and screening to faster hiring decisions.
“Combined with the rise of talent from Tier-2 and Tier-3 India, this is creating a more level playing field for businesses and workers alike. The next chapter of India’s MSME growth story will be driven not just by access to capital, but by access to skilled talent and AI-powered productivity,” he noted.
(KNN Bureau)
