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Incorporating AI Technology in SME Operations in India: Best Practices and Strategies

The landscape of business is changing rapidly, and small and medium enterprises (SMEs) are not immune to these changes. Particularly in India, where SMEs account for nearly 40% of the nation’s GDP and contribute to 45% of the country’s total manufacturing output, as per the Ministry of MSME’s annual report of 2021-2022, the need for digital transformation is evident. One of the most significant aspects of this transformation is the incorporation of artificial intelligence (AI) technology.

AI technology can help Indian SMEs to optimize operations, enhance productivity, and increase competitiveness. According to a report by Accenture, AI has the potential to add US $957 billion, or 15% of India’s current gross value in 2035. However, to harness this potential, SMEs need to adopt the right strategies and best practices.

  1. Understand the potential of AI

AI technology comprises different subsets like Machine Learning (ML), Natural Language Processing (NLP), Robotics Process Automation (RPA), and Computer Vision. Each subset caters to different business needs. For instance, ML can analyse consumer behaviour and create personalized marketing strategies, while NLP can automate customer service through chatbots like ChatGPT.

  1. Identifying the right AI application

Identifying which part of the business would benefit from AI is crucial. For instance, the use of predictive analytics in AI can help SMEs in the manufacturing sector reduce machine downtime and improve supply chain efficiency. Similarly, AI tools like Salesforce Einstein can streamline CRM tasks, making the sales process more efficient.

  1. Creating an AI-ready workforce

SMEs must invest in upskilling their employees to work efficiently with AI tools. They can partner with ed-tech firms like Coursera, Udacity, or UpGrad, offering AI and ML courses. A well-trained workforce can leverage AI technology to its fullest potential.

  1. Collaborate with AI solution providers

Many Indian start-ups like Haptik,, and SigTuple offer AI solutions tailored to SMEs. Collaborating with these AI solution providers can help SMEs implement AI without the need for extensive internal technical expertise.

  1. Prioritise data privacy and security

While incorporating AI, SMEs should ensure data privacy and security. Regulations like the Personal Data Protection Bill of 2019, mandate stringent data security measures. Using AI tools that comply with these regulations, like IBM Watson, which offers robust security features, is crucial.

  1. Measure the ROI

Investing in AI technology can be expensive. Therefore, SMEs need to measure the return on investment (ROI). AI can help increase revenue through improved customer service, reduced operating costs, and better decision-making. However, these returns should outweigh the investment made.

  1. Government Support and Incentives

The Indian government’s ‘AI for All’ strategy aims to position India as a global leader in AI by promoting its adoption across sectors. SMEs should leverage government initiatives like the Atal Innovation Mission (AIM) that encourage the use of AI technology.

Implementing AI technology in Indian SMEs could revolutionize the way these businesses operate, making them more efficient, competitive, and sustainable. With the right strategies and practices, SMEs can overcome the challenges of AI adoption and harness its full potential. It’s high time Indian SMEs stepped into the future and embraced AI technology to reap the benefits it offers.



The ‘no fees, no equity’ Wadhwani Advantage program has a repository of business advisors, SME consultants and mentors, and curated experts who have successfully transformed businesses. You can avail of their services by applying to the Wadhwani Advantage program, which builds capacity to accelerate the revenue of businesses by 2x to 10x.

Businesses with revenue > INR 3Cr can apply here:

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