Here are five ways in which AI can be adopted by small and medium businesses in a cost-effective manner: 

• Businesses can adopt the use of India-first AI tools that offer multilingual support, mobile access, and simplified features.

• Additionally, they also offer Freemium models, GST input credits, and bundled platforms that can significantly reduce adoption costs.

• Early AI integration helps MSMEs become data-smart, improve credit access, and stay competitive in evolving markets.

A majority of MSMEs, a staggering 91%, believe that AI should be democratically available and affordable, proving their willingness to adopt the technology. Despite this readiness, a high 59% of small and medium enterprises remain excluded from mainstream AI adoption due to the high costs associated with tools, computer infrastructure, and workforce training¹. Recognizing this gap, the government is actively collaborating with corporations, technology providers, and skilling institutions to launch targeted upskilling initiatives that align with AI adoption. Given that MSMEs collectively employ over 11 crore people in India, such efforts are not only expected to improve enterprise-level efficiency but also create a digitally enabled workforce capable of driving AI-led transformation from within. 

The affordability challenge is, in fact, part of a larger, multifaceted problem. While cost is a primary concern, linguistic diversity and usability are other significant barriers preventing widespread AI adoption among MSMEs. Most global AI tools are built for English-speaking users and lack robust support for India’s rich linguistic diversity. Consequently, MSMEs in smaller towns often face non-intuitive dashboards and limited local language access, making adoption difficult. 

Add to this the pricing models of popular platforms, including monthly SaaS subscriptions and cloud-based storage dependencies, that are incompatible with the operating models of small businesses. Besides the cost factor, for many MSMEs, access and digital infrastructure also present significant barriers. 

India-First Tools: Built for the Indian MSME Mindset

For most Indian MSMEs, adopting any new technology comes with practical considerations. Solutions must be cost-efficient, easy to learn, quick to deploy, and compatible with the business’s existing infrastructure. These considerations prioritize functionality, value, and speed of implementation over complexity or scale. India-first AI tools are developed with this exact mindset in focus. They are designed to work within the operating conditions of small businesses, where budgets are limited, teams are lean, and digital exposure is still growing. These tools are typically lightweight, capable of running on basic devices, and optimized for mobile networks, eliminating the need for high-end infrastructure. 

Equally important is the ease of use. India-first solutions offer multilingual interfaces, visual dashboards, and voice-activated features, ensuring that MSME owners and staff, regardless of language or digital proficiency, can operate them with minimal training.

Above all, these tools are built to serve specific business functions without burdening the user with unnecessary features. They are intentionally built for the daily realities of MSMEs. In this approach, the priority is not technical sophistication, but enabling small businesses to solve real problems quickly, affordably, and reliably. An example of this India-first technology is UPI, which did not replicate global payment models. It built a framework around local realities and scaled through simplicity and collaboration. Or Shunya.ai, which was released in July 2025 as an AI-driven platform to empower small businesses with automated shipping rate comparisons, delivery routing, and order tracking. Similarly, PixelYatra is the first generative-AI design tool with Hindi-language prompts that lets users generate marketing creatives in their own language.

AI adoption among MSMEs requires a similar mindset: designing for constraint and ensuring affordability, which MSMEs can achieve by adopting cost-effective measures.

Strategies for Cost-Effective AI Integration

Achieving affordable and effective AI integration for MSMEs isn’t just about the tools themselves; it also involves adopting smart strategies and leveraging available benefits. Here’s how small businesses can make AI adoption viable:

1. Leverage Flexible Pricing Models (e.g., Freemium): Opt for AI solutions that offer freemium models, providing basic features free of cost and allowing upgrades as your business grows. This enables testing the technology and mitigating initial financial risk. Many tools also offer subscription or usage-based pricing, spreading costs over time rather than requiring large upfront capital expenditure (CAPEX).

2. Prioritize Mobile-First Deployment: Choose AI tools that support mobile-first deployment, enabling business owners and their teams to operate directly from smartphones. This significantly reduces the need for expensive desktops or advanced computing setups, thereby lowering hardware costs.

3. Explore Shared Infrastructure Models: Look for emerging shared infrastructure models where bundled services offer comprehensive solutions like billing, CRM, and customer engagement on a single platform. This approach consolidates various costs and simplifies management compared to subscribing to multiple individual services.

4. Optimize Financial Practices with ITC: Adopt smart financial practices, such as claiming Input Tax Credit (ITC) on AI tools billed with a valid GSTIN. This effectively reduces the overall cost of adoption, making AI integration more viable for small firms by leveraging built-in governmental benefits.

5. Ensure Local Hosting and Compliance: Prioritize AI solutions that integrate data privacy and compliance by being hosted on local servers with simplified user agreements and alignment with Indian regulatory frameworks. This reassures MSMEs about data security and transparency, reducing compliance-related complexities and building trust. 

MSMEs as Data-Smart Enterprises 

The benefits of AI for MSMEs extend well beyond operational automation. When applied effectively, AI helps streamline core functions like reducing manual errors, improving accuracy, minimizing wastage, and accelerating workflows. This enables small businesses to operate more efficiently, fulfill higher order volumes, and improve overall service delivery without proportionate increases in overheads. 

By digitizing and optimizing key business processes, AI equips MSMEs to make more informed decisions and respond faster to market demands. These improvements also project a more stable and forward-looking business profile that’s not based on forecasts but real operational upgrades. This, in turn, enhances their standing in the eyes of lenders and stakeholders, increasing the likelihood of accessing higher loan amounts and longer-term credit for business expansion. 

In high-volume sectors such as retail, logistics, manufacturing, and food processing, these efficiencies can lead to significant gains in productivity and profitability. MSMEs that adopt AI early will be better positioned to meet modern customer expectations, integrate into formal supply chains, and compete in both domestic and global markets. 

Policy Support and the Role of the Ecosystem

The government has been taking several meaningful steps toward inclusive AI development. For instance, NITI Aayog’s ‘AI for All’ roadmap outlines long-term objectives around accessibility, affordability, and national capability building. The Ministry of Electronics and Information Technology (MeitY) has extended support to AI-focused startups and launched digital skilling programs aimed at non-metro audiences. As part of the broader IndiaAI Mission, the government allocated ₹2,000 crore in the Union Budget 2025–26 to support AI innovation, workforce training, and the creation of Centres of Excellence focused on MSME-relevant applications. 

On the ground, public-private collaboration models are emerging in key industrial regions such as Coimbatore, Surat, and Kanpur. These initiatives involve local chambers of commerce, educational institutions, and government agencies working together to promote awareness and access. A dedicated technology centre worth ₹200 crore is also being developed in Coimbatore to provide MSMEs with access to automation and AI-led process training under a public-private model.  

This makes AI no longer a distant or aspirational technology. For India’s MSMEs, it represents a practical pathway to sustained growth, stronger business performance, and greater resilience in a rapidly evolving economic environment.