Artificial Intelligence represents a core topic in Industry 4.0; the presence of AI in various sectors is evident from the adoption of this programmed replication of supreme human intelligence in judiciary, financial sectors and also MSME. According to reports from The Economic Times, around 63 million MSMEs roughly contribute to one-third of the nation’s Gross Domestic Product (GDP); which is about 45 percent of manufacturing output and 40 percent of direct and indirect exports.
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The annual AI index report published by the Stanford University documented that India saw the fifth highest investment in the year 2023 in various start-ups based on Artificial Intelligence products and services. The importance of AI is taken as paramount by the Government of India. One such initiative by the Ministry of Electronics and Technology is INDIA ai (A portal which promotes and features articles on Artificial Intelligence by policy makers, researchers, columnists etc).
Another, collaborative initiative by the National e-Governance Division of the Ministry of Electronics and Information Technology and Intel India is the Responsible AI for Youth (YUVAi) programme, which aims to develop a more AI friendly, AI literate and a new-tech mindset needed in the market to understand relevant skills with the introduction of AI. Such initiatives will equip and empower students from the very introductory level, with the required knowledge in the new age of AI.
Can Artificial Intelligence transform India’s MSME landscape? MSME is the backbone of India’s economy. The contribution of MSME to the socio-economic development across the demographic landscape of India’s economy is immensely important with 45.83 percent share of exports of goods produced by MSME up to November, 2023.
Understanding the importance of MSME in the development of India, the Ministry of MSME, Government of India, emphasises on the development of business environment, by introducing collateral free loans by Pradhan Mantri Mudra Yojana. To understand how AI adoption can navigate India’s MSME growth, we have taken into account two aspects:
a) AI Literacy or AI Awareness. And,
b) Acceptance of AI
a) AI Literacy:
The campaign “AI Literacy for All” by Uttar Pradesh Government is an initiative to introduce the presence of AI and make people more familiar with the new technology. As India takes steps to be the Global Innovative Hub for technologies, the New Education Policy (NEP) 2023 understands the importance of AI driven workforce, and the potential linkages between AI literacy and job opportunities. The adoption of policies to educate the entrepreneurs or students (who might be entrepreneurs in future) will help the coming generation to understand the importance of AI and its collaboration as tools to various businesses, which will only contribute to the growth and efficiency of the enterprise. Also, using tools built as AI to manage finance and other managerial works can only help the entrepreneur in saving time and money. However, the awareness and literacy to use the tool by the manager or the entrepreneur is important to avoid any miscalculated results for their respective businesses.
b) Acceptance of AI:
The acknowledgment of Artificial Intelligence in MSME has been documented in various academic research papers. With the advent of Industry 4.0, Artificial Intelligence has been the global topic revolving around. It emerged as one of the big players in the adoption across various sectors, and, MSME has been no exception, to accept the new age of AI.
Key industries which included or adopted AI have been textiles, machinery and parts, mining and quarrying, basic metal industries, electrical machinery and apparatus, transport equipment and parts, paper products and printing, food products, chemical and chemical products, leather, wood, rubber, plastic and other non-metallic mineral products, beverages and tobacco products (Sharma et al, 2022; Artificial intelligence framework for MSME sectors with focus on design and manufacturing industries).
However, given the constraint that the adoption of AI in India’s MSME has not been fully documented or the process is in its early stage. Therefore, drawing a conclusion on “Merit/Demerit” of AI adoption in MSME will be a hasty generalization.
Conclusion: Understanding AI adoption in MSME
Artificial Intelligence has the potential to revolutionaries India’s MSME, the adoption of AI to improve efficiency and productivity has been a key factor documented in various research papers. As the backbone of India’s economy, the channelized and proper adoption of AI in the MSME can reduce cost of operation, improve customer experience and also increase revenue.
Various initiatives such as INDIA ai and YUVAi by the Ministry of Electronics and Information Technology, Government of India are commendable approaches to educate, aware and introduce the population and workforce in the new environment of AI driven world. However, a more inclusive and on ground awareness campaign in rural and hilly regions of India might be a policy suggestion.
While the benefits of AI are promising, it’s important to recognize that the transition will not be without challenges. The early stages of AI adoption in MSMEs indicate that there is much to learn and develop, before the full potential of can be realized. Therefore, a cautious yet optimistic approach, supported by continuous learning and adaptation, will be essential to ensure AI’s role to transform India’s MSMEs into the engines of economic growth in the era of Industry 4.0.
(The writer is Columnist & Researcher, Economics. He can be contacted at ashrafrehman41@gmail.com; Phone Number: +91 7005149256; X (Twitter): @therehmanashraf
