Industry 5.0 emphasises a human-centric approach, sustainability, and adaptability to change in digital transformation, extending the philosophy of Industry 4.0. For Indian micro, small and medium enterprises (MSMEs), this paradigm is highly pertinent yet under‑theorised. This conceptual review synthesises research on sustainable digital transformation in MSMEs, Industry 5.0, and MSME competitiveness to propose an integrated model for Indian MSMEs. Systematic and comprehensive reviews highlight the mediating role of stakeholders, organisational capabilities, and technologies—particularly big data, IoT, and AI—in achieving sustainability through digital transformation (Martínez-Peláez et al., 2023; Melo et al., 2023; Martínez-Peláez et al., 2024; Machado et al., 2024). Studies on digitisation and MSME competitiveness identify key factors (technological readiness, institutional support, innovation capacity) and barriers (resource constraints, skills gaps, regulatory complexity) (Singh & Anees, 2025; Putranto, 2025; Syaifullah et al., 2025; Nautiyal et al., 2025). Industry 5.0 literature emphasises that Industry 4.0 has improved economic and some environmental outcomes, while often undermining social and macro-level sustainability, motivating a human-centred, sustainable, and resilient agenda (Ghobakhloo et al., 2024; Hein-Pensel et al., 2023).Building on these strands, the paper proposes a seven-pillar conceptual model for Indian MSMEs: enabling environment, strategic orientation, human-centric capabilities, digital capabilities, process and business-model innovation, sustainability and resilience mechanisms, and sustainable competitiveness outcomes. The model aligns Industry 5.0 values with people–process–technology mechanisms and triple‑bottom‑line performance in MSME supply chains (Melo et al., 2023; Martínez-Peláez et al., 2024; Mick et al., 2024; Machado et al., 2024). It also identifies India‑specific barriers to green and digital transformation and highlights research gaps regarding Industry 5.0 in MSMEs, measurement of social sustainability, and heterogeneous pathways for micro versus small and medium firms (Melo et al., 2023; Hein-Pensel et al., 2023; Nautiyal et al., 2025; Machado et al., 2024). The paper concludes with implications for policymakers, support institutions and MSME managers seeking to operationalise Industry 5.0 as sustainable, human‑centric digital innovation in India..