AI in microenterprises (continued) BOX 1 Using AI to address microenterprise challenges Challenge Description How AI can help (mobile-based solutions) Low levels of productivity and wagesManual operations and lack of digital tools reduce efficiency and income –Voice-enabled productivity apps: AI-powered apps (such as Google Assistant) can set reminders, track sales and manage inventory using simple voice commands in local languages –AI WhatsApp bots: Receive and send orders, generate bills and check stock via WhatsApp Lack of access to creditNo formal credit history makes bank loans hard to get –AI credit scoring via mobile wallets: Fintech apps use AI to analyse transaction patterns for loan eligibility –Mobile lending platforms: AI suggests suitable micro-loans based on SMS and UPI transaction history (Lendingkart, Indifi) Poor infrastructure and market accessDifficulties reaching wider markets due to poor connectivity and know-how –AI social media tools: Mobile-friendly apps to auto-create ads, suggest hashtags and optimize posting times (Zoho Social, Canva) Punitive or complex regulationsComplex tax, licensing and compliance processes are hard to navigate –AI-powered compliance assistants: Apps offer mobile reminders, voice-guided GST filing help (GITA - GST Interactive Technical Assistant) and automated invoice generation (Vyapar , Zoho Invoice) –Legal chatbots: Micro-entrepreneurs can ask policy or scheme- related queries and get simple summaries in local languages While it will take a long time for these microenterprises to realize the full potential of AI due to their low digital and AI maturity, they can still make use of basic AI tools. The following strategy can unlock the value of AI for microenterprises: 1. Start with free/low-cost AI tools: Microenterprises can begin their AI journey by using free or low-cost AI tools in their business operations. Several AI tools on the market offer a freemium model, charging users only for usage above a certain scale or to access certain features. The Application Development Initiative, under the IndiaAI Mission, is also focused on developing AI applications in critical sectors, with 18 applications already under development. Using these free or low-cost applications will increase microenterprises’ familiarity with AI and help build trust before progressing to more advanced applications. 2. Opt for AI-as-a-service models: AI-as-a-service models allow small businesses to implement AI capabilities as cloud-based services, which does not require significant investment in infrastructure. This also allows for a faster deployment time, so microenterprises can start seeing returns quickly and scale their AI use accordingly. 3. Adopt AI via mobile-based applications: There has been a significant uptick in mobile phone penetration in India in recent years, with 85% of Indians having access to a mobile phone and 60% having access to the internet.21 Microenterprise owners can use mobile-based AI tools such as chatbots and AI assistants. As they identify specific use cases, they can buy more advanced mobile-based tools for accounting, inventory, supply- chain management, etc. The use of basic AI tools can help microenterprises slowly increase productivity and optimize operations. This will gradually free up working capital and improve margins, leaving more resources that can be invested in advanced AI applications and AI infrastructure. However, this change will be slow and gradual. Going forward, this playbook will focus on India’s small and medium enterprises (SMEs) 12 Transforming Small Businesses: An AI Playbook for India’s SMEs12

Transforming Small Businesses 2025