1.2 MSMEs in India differ on multiple dimensions While MSMEs are often referred to as a single unit in this playbook, it is important to recognize that in India they are not a homogenous group, varying widely in terms of size, sector and geographical location, among other factors. Understanding this range is important so that the recommendations made in this playbook can be tailored to the differing challenges, resources and technological readiness of the approximately 63 million13 MSME organizations.MSMEs by size MSME classification in India is based on the annual turnover and investment in plant and machinery made by the organization.14 While the characteristics of the organization vary even within each of the three categories, microenterprises typically face the highest barriers to technology adoption, while medium enterprises are best suited to new technology adoption. Table 1 details the classification system and notes the number in each segment in the MSME ecosystem as well as typical characteristics with respect to technology and AI. MSMEs by turnover and investment limits TABLE 1 Diversity within the MSME landscape FIGURE 2Source: Ministry of Micro, Small & Medium Enterprises. (2025, February 4). Budget 2025–25: Fuelling MSME expansion. https://pib.gov.in/PressReleasePage.aspx?PRID=2099687; Government of India. (2024). Annual Report 2023–24. https://msme.gov.in/sites/default/files/FINALMSMEANNUALREPORT2023-24ENGLISH.pdfClassificationAnnual turnover limitInvestment limitNumber of MSMEsTypical characteristics Micro INR 10 crores ($1.18 million)INR 2.5 crores ($295,000)63.05 million Minimal automation, informal data management and limited access to finance Small INR 100 crores ($11.8 million)INR 25 crores ($2.95 million)331,000 Structured operations, often use accounting tools Medium INR 500 crores ($59 million)INR 125 crores ($14.75 million)5,000 Often use enterprise resource planning (ERP) software, better financial access While MSMEs are often referred to as a single unit in this playbook, it is important to recognize that in India they are not a homogenous group. 50+10-50Typical workforce size Typical example 10 crores ($1.18 million)1-10 Repair shopsVegetable vendors Small workshopsGrocery stores Factories OEM manufacturersNumber of enterprises Micro: 63.05 million Small and medium: 336,000Annual turnover limit 100 crores ($11.8 million) 500 crore ($59 million) Note: This visual is for representation only and is not drawn to scale; this playbook will primarily focus on small and medium enterprises (SMEs). Source: Ministry of Micro, Small & Medium Enterprises. (2025, February 4). Budget 2025–25: Fuelling MSME expansion. https://pib.gov.in/PressReleasePage. aspx?PRID=2099687; Government of India. (2024). Annual Report 2023–24. https://msme.gov.in/sites/default/files/FINALMSMEANNUALREPORT2023- 24ENGLISH.pdf; World Economic Forum analysis Transforming Small Businesses: An AI Playbook for India’s SMEs 10

Transforming Small Businesses 2025