Indian MSMEs and the Urgent Need for “Desi AI”

India’s Micro, Small, and Medium Enterprises (MSMEs) are the backbone of the economy, contributing nearly 30% to GDP and employing over 110 million people. Yet, they stand at a critical crossroads in the era of Artificial Intelligence (AI). While large corporations are rapidly adopting advanced technologies, most MSMEs continue to find global AI solutions either too complex or prohibitively expensive. This growing gap highlights an urgent need for “Desi AI”—simple, affordable, and locally tailored solutions designed specifically for small businesses.

Why Global AI Solutions Don’t Fit MSMEs

Off-the-shelf AI tools from multinational providers are often built for large enterprises with sophisticated IT infrastructure and high budgets. Indian MSMEs, however, work with lean teams, limited resources, and highly localized business models. For example, a small textile exporter in Surat or a food-processing unit in Belagavi does not need a heavy-duty AI platform; they need easy-to-use, mobile-based tools that can forecast demand, manage inventory, or automate credit assessments at minimal cost. The mismatch between global AI products and local business needs is therefore one of the biggest barriers to digital transformation in the MSME sector.

Karnataka’s Push: Building AI Momentum on the Ground

The state of Karnataka, contributing nearly 44% of India’s IT GDP, has taken a proactive step to push AI adoption among its MSMEs. At the HDB Techceleration 2025 in Belagavi, the Software Technology Parks of India (STPI) stressed the urgent need for MSMEs to close the technology gap. To support this transformation, a 200-seat incubation centre in Hubballi is set to open soon, providing startups and MSMEs with access to affordable AI tools, mentorship, and collaborative networks. This is significant because technology adoption at the grassroots often requires both handholding and infrastructure support, not just availability of tools.

Bridging the ₹30 Lakh Crore Credit Gap with AI

One of the most persistent challenges for MSMEs has been access to finance. Traditional lending processes are slow, paperwork-heavy, and often biased against small businesses lacking collateral. IDBI Bank’s recent initiative to deploy machine learning models for credit assessment is a step in the right direction. By analyzing cash flows and transaction histories, these models can approve loans in 15–20 minutes, helping bridge the staggering ₹30 lakh crore credit gap faced by the sector. This innovation not only reduces friction but also democratizes finance by empowering businesses that previously operated outside the formal credit system.

The Case for “Desi AI”

The examples from Karnataka and IDBI show that AI can make a real difference—when designed with MSMEs in mind. A locally built AI ecosystem could prioritize:

Affordability: Subscription models priced for small businesses.

Ease of Use: Mobile-first interfaces in regional languages.

Sector-Specific Solutions: Tools tailored for textile clusters, agri-processing, handicrafts, or retail.

Trust and Support: Local training and advisory centres to build confidence in technology adoption.

Policy and Ecosystem Support

The future of Indian MSMEs depends on how quickly they can integrate digital and AI-driven practices. Government schemes like Digital India and Atmanirbhar Bharat must go beyond connectivity and infrastructure, focusing instead on co-creating AI solutions with startups, banks, and industry associations. If India can successfully deliver “Desi AI” at scale, MSMEs will not only close the technology gap but also enhance productivity, competitiveness, and resilience in global markets.

In short, the question is no longer whether Indian MSMEs need AI—it is how fast they can access the right kind of AI. The answer lies in making it local, simple, and truly desi.#MSMEs #DesiAI #DigitalTransformation #ArtificialIntelligence #CreditGap #IDBIBank #KarnatakaGrowth #TechForMSMEs #AffordableAI #AtmanirbharBharat