MUMBAI: Small businesses are getting a bigger brain and the numbers suggest it could be a very smart investment. India’s micro, small and medium enterprises (MSMEs) could generate more than $490 billion in economic value by embracing artificial intelligence and digital technologies, according to a new report released by Google and the India SME Forum.
Titled The Google Dividend: Measuring Digital Commerce’s Contribution to India’s Economic Future, the study is based on a primary survey of 3,249 MSMEs combined with macroeconomic analysis, highlighting how digital adoption is reshaping India’s small business landscape through improved efficiency, wider market access and stronger financial performance.
The findings suggest that digital tools are already delivering tangible results. Around 66 per cent of surveyed MSMEs reported improved market access, while 58 per cent said they had acquired more customers after adopting digital platforms. Nearly 60 per cent also recorded double-digit revenue growth, reflecting the increasing role of technology in business expansion.
Looking ahead, the report estimates that broader adoption of AI-powered tools and agentic workflows could lift business profitability by 30 per cent to 35 per cent, as companies automate routine tasks, streamline supply chains and make faster operational decisions.
Digital transformation is also helping businesses cut costs. According to the report, 78 per cent of MSMEs reduced customer acquisition costs through digital adoption, while early AI deployments indicate operational costs could decline by 20 per cent to 30 per cent. More than 54 per cent of respondents reported earning returns of at least 2x to 3x on digital advertising, with some businesses achieving returns of up to 5x.
Beyond individual enterprises, the report estimates that MSME digital advertising contributes around Rs 49,700 crore in economy-wide output and Rs 32,300 crore in Gross Value Added (GVA). It also projects that GST collections linked to this activity have increased by more than two-thirds over the past two years, reaching Rs 6,534 crore in 2025.
The study also outlines AI’s expanding role across merchandising, sourcing, customer engagement and supply chain management. It estimates that AI-driven personalisation and digital analytics can improve conversion rates by 23 per cent, while AI agents could increase productivity by 15 per cent to 20 per cent across business operations.
A message from Shobha Karandlaje, Minister of State for MSME and Labour & Employment, read during the launch, said technology is enabling businesses of all sizes to expand their reach while improving productivity and supporting India’s long-term development goals.
Commenting on the findings, India SME Forum, president Vinod Kumar said wider access to AI and digital technologies could help small businesses overcome longstanding constraints such as limited managerial capacity, information gaps and access to specialised expertise.
Google vice president and general manager, ads & commerce Vidhya Srinivasan said AI-powered products are helping businesses connect more effectively with customers, adding that the next generation of agentic AI will enable enterprises to anticipate demand, automate repetitive work and improve customer engagement.
As India’s digital economy gathers pace, the report argues that AI is no longer simply a productivity tool, it is becoming a competitive advantage that could reshape the future of the country’s vast MSME sector.
