AI could add $150B to MSME growth by 2035
What's the story
Artificial Intelligence (AI) is projected to add between $135.6 billion and $149.9 billion to the growth of Micro, Small, and Medium Enterprises (MSMEs) in the manufacturing sector by 2035. The estimate comes from a PwC report titled "Unlocking the AI Edge for MSMEs." However, this potential contribution depends on these enterprises making up 50% of India's manufacturing value added.
Future potential
MSME growth potential by 2047
The report also highlights that MSMEs could unlock growth opportunities worth $3.13-3.21 trillion by 2047. This would require India to increase the manufacturing share of its GDP to 25%, and for MSMEs to raise their contribution to manufacturing gross value added (GVA) from 35.4% in FY 2023-24, to 50%. To achieve this, MSMEs must adopt AI on shop floors and leverage the technology as active partners across global value chains.
Market potential
Infrastructure investment and supply chain opportunities
Beyond direct production, there's a major demand-side opportunity for MSMEs to supply non-technical manufacturing products to AI infrastructure and chip manufacturers. The report identifies a market for "harnesses, chambers, cooling equipment, and other non-technical manufacturing products" worth $100 billion-$150 billion. With AI expected to add $1.7 trillion to the overall economy by 2035, an investment of $500 billion is needed for its infrastructure.
Tech integration
Overcoming operational constraints with AI integration
The report notes that "non-tech-intensive capital goods account for 20-30% of capex on such projects," a sector where MSMEs are active. By lowering capability barriers across design, quality, and decision-making, AI can help these firms "leapfrog structural and operational constraints" and "escape the low-productivity trap." This technological integration can also enable them to reposition themselves as "competitive value creators rather than cost-based suppliers."
AI functions
Transition management and framework for AI adoption
The report defines AI's role through three functions: a "Scaler" that decreases processing times, an "Enricher" that augments human decision-making, and a "Reinventor" that transforms value capture. To manage this transition, the study proposes a "3A2I framework" built around "access, acceptance, assimilation, implementation, and institutionalization." This framework will help firms translate adoption into measurable value.