Artificial intelligence (AI) has emerged as a crucial instrument for companies seeking to enhance their efficiency, creativity, and output. In recent years, there has been increased focus on the adoption of AI technologies by small and medium-sized enterprises (SMEs) in developing countries. These SMEs often face challenges in optimizing their operations and maximizing productivity. AI can address these issues by automating repetitive tasks, providing real-time data analysis, and streamlining decision-making processes. For instance, AI-driven chatbots can efficiently handle customer inquiries, while AI-based inventory management systems can reduce costs and optimize stock levels. SMEs can leverage AI to enhance decision-making, streamline supply chain operations, and improve customer experiences. Additionally, AI-powered predictive analytics can help SMEs reduce waste by forecasting demand patterns and adjusting their inventory accordingly. This study aims to examine the impact of AI on the productivity and sustainability of SMEs in India. The research will employ descriptive design and utilize a structured questionnaire to assess the awareness and utilization of AI tools in SMEs. The results will highlight the best practices, benefits of AI implementation, and obstacles faced by SMEs when adopting AI technologies.