Two-thirds of MSMEs use AI tools, but only 21% deploy biz software: Study

A CII-ISB study finds 65.8 per cent of surveyed MSMEs use AI tools, but just 21 per cent deploy ERP or customised software, highlighting gaps in technology adoption and productivity.

Nearly two-thirds of India’s micro, small and medium enterprises (MSMEs) use artificial intelligence (AI) tools, but only about one-fifth rely on integrated business software to manage operations, highlighting a gap between technology adoption and its effective use, according to a joint study by the Confederation of Indian Industry (CII) and the Indian School of Business (ISB).

 

The report, MSMEs in India: Challenges, Opportunities and the Road Ahead, found that 65.8 per cent of surveyed enterprises used AI tools, while only 21 per cent used enterprise resource planning (ERP) or customised business software to manage their operations.

 

AI was primarily used for business communication, cited by 34.9 per cent of respondents, followed by content creation (22.3 per cent) and training (18.9 per cent).

 

 

The study, based on an analytical sample of 2,919 confirmed MSMEs across all 36 states and Union Territories and 40 industry sectors, said the next phase of policy support should focus on converting technology adoption into measurable improvements in productivity, quality and business growth.

 

The report, however, cautioned that its survey was voluntary and not probability-weighted to represent all Indian MSMEs.

 

The study identified working-capital constraints, delayed customer payments and difficulties in accessing finance as recurring challenges for smaller businesses.

 

Enterprises may have confirmed orders but still struggle to pay employees, procure raw materials or invest in expansion when customer payments are delayed, it said.

 

The report recommended stricter enforcement of payment timelines across public and private buyers, wider use of the Trade Receivables Discounting System (TReDS) and greater availability of loans based on verified cash flows, receivables and orders rather than collateral alone.

 

It also called for short-term bridge credit and improved invoice financing to help businesses manage liquidity pressures.

 

The study found that 74.9 per cent of surveyed MSMEs were aware of at least one government scheme, but only 42.6 per cent reported using one. Enterprises with recognised certifications, external credit ratings and higher turnover were more likely to access government support, indicating that smaller and less-equipped businesses may face greater difficulties navigating application and eligibility requirements.

 

The report proposed a unified digital platform that would allow enterprises to discover relevant schemes, check eligibility, submit applications, track approvals and resolve grievances through a single interface.

 

Only 32 per cent of surveyed MSMEs held recognised certifications. Among those without certification, 50.9 per cent said their customers did not require it, while 30.4 per cent cited a lack of awareness.

 

The study also found that 11.8 per cent of MSMEs in its export-focused analytical sample served international markets.

 

The use of ERP or customised business software, recognised certification, manufacturing activity and better internet connectivity were associated with higher odds of export participation, suggesting that international market access depends on a combination of operational capabilities rather than enterprise size alone.

 

The report recommended linking certification assistance with actual procurement and export requirements, alongside support for testing, technical guidance, reliable connectivity and buyer discovery.

 

To address these interconnected constraints, the CII-ISB report proposed five national missions focused on liquidity and payment discipline, an integrated digital journey for MSMEs, technology adoption with implementation support, skills development, and market access, quality and green competitiveness.

 

It also called for closer collaboration among governments, financial institutions, large companies, industry associations and academic institutions to improve supplier development, workforce training and access to markets.

 

The report said the effectiveness of policy interventions should be assessed through outcomes such as shorter payment cycles, improved access to credit, faster scheme approvals, higher productivity and greater export participation, rather than registrations or training numbers alone.

 

According to the report, MSMEs account for approximately 31.1 per cent of India’s gross domestic product and 48.58 per cent of exports. Data cited in the study showed that registrations under the Udyam and Udyam Assist platforms reached 9.77 crore as of October 6, 2026, with 43.27 crore jobs reported through the platforms.