AI adoption could unlock over $490 billion for Indian MSMEs

New Delhi: Artificial intelligence (AI) adoption by Indian micro, small and medium enterprises (MSMEs) could unlock more than $490 billion in economic value, while improving business profitability by 30 to 35%, according to a report released jointly by Google and the India SME Forum. Titled 'The Google Dividend: Measuring Digital Commerce's Contribution to India's Economic Future', the report is based on a survey of 3,249 MSMEs and examines how digital tools and AI are transforming India's small business ecosystem. The report comes at a time when Indian MSMEs are increasingly adopting digital technologies to expand market reach, improve operational efficiency and strengthen customer engagement. Digital adoption driving business growth According to the report, 66% of surveyed MSMEs said digital adoption had helped them expand into new markets, while 58% reported improved customer acquisition. Nearly 60% of respondents said they had achieved double-digit revenue growth, while businesses using AI are projected to improve profitability by 30-35% on average. The report also found that 78% of MSMEs experienced lower customer acquisition costs after adopting digital tools. Early AI deployments have the potential to reduce operational costs by 20-30%, it added. On advertising returns, 54% of businesses reported achieving 2x to 3x return on ad spend, with some recording returns of up to 5x. Wider economic impact Beyond individual businesses, the report estimates that MSME digital advertising contributes around Rs 49,700 crore to India's overall economic output and Rs 32,300 crore in Gross Value Added (GVA). It also estimates that GST collections linked to digital commerce have risen by more than two-thirds over the past two years to reach Rs 6,534 crore in 2025. A message from Shobha Karandlaje, Minister of State for MSME and Labour & Employment, was read out during the report launch. “The true depth of our economic progress is found in the aspirations of millions of small-scale enterprises, artisans, and entrepreneurs spanning every corner of India. Technology is reshaping grassroots commerce, allowing a business in any district to command visibility and engage consumers directly. This democratization ensures that market exposure is accessible to all, irrespective of geographic location or capital size. Under the leadership of Hon’ble Prime Minister Shri Narendra Modi, the Ministry of MSME remains committed to improving access to finance and markets, promoting formalisation, strengthening skilling, and encouraging technology adoption through the Udyam ecosystem and a range of schemes and initiatives. As we work toward a future-ready economy under the vision of Viksit Bharat 2047, robust digital tools, particularly AI adoption, can help micro and small enterprises expand their commercial horizons, accelerate formalization, and drive sustainable growth. I congratulate Google India and the India SME Forum on ‘The Google Dividend’ report, which is a valuable, data-rich look at how digital adoption is powering India’s MSME sector.” Vinod Kumar, President, India SME Forum, said, “The long-term trajectory of India's digital economy will depend not only on the pace of technological advancement, but also on the extent to which MSMEs are able to absorb and deploy these capabilities productively. For many small businesses, constraints related to information asymmetries, managerial bandwidth and access to specialised capabilities can limit their ability to scale and compete effectively. The findings of this report suggest that digital adoption and the growing accessibility of artificial intelligence can help narrow some of these structural disadvantages.” Vidhya Srinivasan, VP and GM, Ads & Commerce, Google, said, "India’s digital maturity has unlocked new opportunities for small businesses. Our AI-powered tools have helped millions of small businesses reach new customers on Google and convert real-time consumer interest into growth. Looking ahead, agentic AI will actively work on a business’s behalf to connect it with ready buyers, predict hyper-local demand shifts, and win new customers at the exact moment of intent." The report said agentic AI is expected to play a larger role in customer engagement, merchandising, sourcing and supply chain management. It estimates that AI-powered personalisation and digital analytics can improve conversion rates by 23%, while AI-driven workflows could boost enterprise productivity by 15-20%. The study concludes that wider access to digital technologies and AI will be critical for improving MSME productivity and supporting inclusive economic growth as India's digital economy continues to evolve.