Can AI be the game changer for Indian manufacturers?

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Can AI be the game changer for Indian manufacturers?

Can AI be the game changer for Indian manufacturers?

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Nov 29,25

While manpower issues and quality are driving adoption of industrial automation, cost and lack of knowledge are causing hindrances. Artificial intelligence (AI) can be the game changer, writes Rakesh Rao.

Can AI be the game changer for Indian manufacturers?

Since 2014, the global economy has evolved significantly, making supply-chain trust and resilience central to the Indian manufacturing sector’s next phase of success. Recent disruptions—from the pandemic to geopolitical tensions and trade conflicts—have exposed the fragility of international supply chains forcing companies to redraw their sourcing and manufacturing strategies. According to Rajesh Mandlik, CEO, Setco Spindles India Pvt Ltd, two major trends stand out in the machine tools industry. "First, supply chain development has become a priority. Traditionally, machine tool companies manufactured many components in-house, but now there is a clear shift towards developing external accessory and component suppliers, which strengthens the broader ecosystem. Second, digitisation is becoming integral. Predictive maintenance, data acquisition, overall equipment effectiveness (OEE) measurement and IoT-enabled systems are now increasingly embedded in machine tools. These technologies were not widespread earlier, but the transition is accelerating."

For India, uninterrupted access to raw materials, components and technology is vital, given manufacturing’s 12–13 per cent contribution to GDP and its potential for higher value addition. “In the past five years, the adoption of automation has accelerated, largely due to the COVID-19 pandemic. From a manufacturer’s perspective, the pandemic exposed dependency on skilled human labour. Labour migration, absenteeism and skill shortages disrupted operations. Companies realised that automation is no longer optional—it is essential for resilience, consistency and business continuity. With manufacturing growing at a strong pace, competition for skilled workers has intensified. Manufacturers now recognise that deep, rapid adoption of automation is necessary to maintain productivity and meet market demand," observes Sameer Gandhi, Managing Director, Omron Automation Pvt Ltd.

Changing manufacturing landscape

The manufacturing activities govern the economic growth of any nation. “In recent times, mainly in the last decade, we have witnessed two major movements: Make in India and Industry 4.0. This has undoubtedly accelerated the pace of automation in India. In the Indian context, automation has been quite evident and effective in the automobile industry, high-precision electronics manufacturing, and process/food industries, among others. While automation in manufacturing aims to increase productivity and quality, it also seeks to enhance safety in hazardous and repetitive tasks. There are instances of automation with the implementation of robotics, artificial intelligence (AI) and digitalization," comments Dr Vivek K Sunnapwar, Principal, K J Somaiya Institute of Technology.

As global trade policies continue to shift, Indian manufacturers must become more agile in their sourcing strategies. Flexibility and adaptability are now essential to remain competitive and avoid risks such as excess inventory or production delays. Atul Patil, GM – Marketing, FA Systems, Mitsubishi Electric India, says, “India’s manufacturing sector is moving toward greater digital depth, stronger supply-chain control and higher production resilience. India’s industrial automation market—estimated at $ 17.28 billion in 2025—is projected to reach $ 33.64 billion by 2030 with a CAGR of around 14.3 per cent. Companies across automotive, electronics, FMCG, pharma and engineering are reshaping factories using data, advanced automation and energy-aware operations. National programmes and the push for local value creation are encouraging manufacturers to modernise everything, including material tracking and process control.”

Manufacturers across sectors are shifting from conventional, labour-intensive processes to highly automated, data-driven and quality-focused operations. "There is a strong push toward precision manufacturing, energy efficiency and digital integration as companies aim to meet global standards and expand their export competitiveness. At the same time, the demand for robotics, smart machines and connected factories is rising sharply, driven by productivity needs, workforce upskilling and the rapid growth of sectors like automotive, EV, pharma and electronics. Overall, India is evolving into a more agile, technologically progressive manufacturing economy, creating significant opportunities for advanced automation and digital solutions," observes Atul Patil.

So where does India stand vis-à-vis other Asian countries in automation adoption? "In discrete manufacturing, automotive and digital industries are the leading adopters, followed closely by food and beverages. At a global level, India still has considerable ground to cover. For instance, although India is emerging as the fifth-largest market for industrial robots, our installed base is a fraction of countries like China, Japan and South Korea. We are progressing quickly, but the gap remains significant," says Sameer Gandhi.

Technology is also playing a pivotal role in enhancing product safety, reducing errors, and enabling data-driven decision-making in process industries such as pharmaceuticals, food & beverages, etc. "Automation is extensively deployed across our manufacturing and quality checkpoints to ensure precision and minimise human error. Automated filling, blending, and packaging lines deliver consistent product measurements, while vision-based inspection systems quickly detect any packaging defects or errors. Additionally, automated Clean-in-Place (CIP) systems in our beverage unit maintain the highest standards of hygiene, significantly reducing manual dependency and error rates," states Anand Mishra, VP-QMS & ESG, Ghodawat Consumer Ltd (GCL), the FMCG arm of Sanjay Ghodawat Group (SGG).

Looking ahead, he feels, a combination of advanced technologies and innovative strategies will be critical for FMCG organisations to achieve their sustainability goals by 2030. “IoT-enabled systems are set to revolutionise resource efficiency in manufacturing, with smart meters and sensors providing real-time tracking of energy and water usage, predictive maintenance to reduce downtime and wastage, and automated monitoring for air, water, and effluent quality. These tools facilitate data transparency and enable plants to become increasingly resource-efficient,” he adds.

According to Vivek Prasad, Executive Director, Avalon Consulting, industrial automation is not new to India because industries like automotive, consumer durables and pharmaceuticals have been early adopters. “India continues to be a labour centric and mechanisation driven market in large parts of the manufacturing sector especially in the SME segment. However, with movements like Make-in-India and China Plus One (which aim to integrate Indian manufacturing into global supply chains), automation, Industry 4.0 and digitalisation are expected to make a big impact,” he says.

Straining supply chains

The years 2024 and 2025 were notably challenging for the industrial automation sector, marking a period of slowed investment, softer demand and broader market uncertainty."2024 marked the lowest point, while the recovery in 2025 was disrupted by tariffs and related geopolitical tensions. The outlook for 2026 is cautiously optimistic, with recovery expected as interest rates fall, uncertainty eases, and orders delayed over the past two years begin to return," says Blake Griffin, Research Manager, Interact Analysis.

Since the start of 2025, the US administration has adopted a policy to impose high tariffs on other countries. This policy has driven up equipment costs and reduced the competitiveness of overseas automation OEMs, despite the lack of equivalent domestic alternatives. The broader disruption is expected to stem from retaliatory measures—particularly from China. The ongoing US–China trade tension has intensified supply-chain risks, with China leveraging its near-monopoly over rare earth materials.

"China has a powerful bargaining tool: near-monopoly control over key rare earth materials. It has used this strategic advantage in response to the tariffs imposed on Chinese goods. Any restriction in the availability of these materials will put severe pressure on global supply chains if left unaddressed," opines Blake Griffin.

Rare earth metals remain indispensable for automation OEMs, especially for components such as servo motors that rely on permanent magnets. Although the US has secured a temporary pause from China on some export bans, restrictions on magnet-related rare earths continue, placing pressure on global automation manufacturers.

India, like other countries, is also affected by rare-earth restrictions. "India may find it more difficult to secure American-made automation products that rely heavily on restricted materials. On the other hand, Indian manufacturers may become more competitive internationally because they retain access to these materials and can continue production without major disruption," comments Blake Griffin.

Prateek Jain, COO & Co-Founder, Addverb, adds, "While supply conditions have improved compared to the peak disruption years, availability of critical components such as advanced chips, high-precision drives, sensors and specialised communication modules still fluctuates. Lead times remain longer than pre-2020 levels, which forces manufacturers and automation providers to diversify sourcing and build stronger supplier networks. Localisation of sub-assemblies is rising, but India still relies on global supply chains for high-end electronic and electromechanical parts. Building a resilient component ecosystem will be essential as the country scales its automation footprint across factories and logistics hubs."

Today, component-availability challenges remain a global reality. Atul Patil explains, "Semiconductor supply cycles, rare-earth dependencies and international trade conditions continue to influence lead times for drives, controllers, power electronics and sensor-heavy equipment. Although the situation is more stable today than in recent years, variations in availability still affect planning."

Slow pick-up in robot market

India has rapidly positioned itself among the world’s fastest-expanding robotics markets, recording an 84 per cent rise in industrial-robot installations between 2021 and 2024. Today, it is the sixth-largest market globally for yearly robot deployments. However, after a sharp 59 per cent jump in 2023, momentum slowed to 7 per cent in 2024, and 2025 has been clouded by tariffs and broader economic uncertainty. Rajesh Mandlik opines, "Robotics adoption is rising, although it will take time for India to reach the maturity levels of developed economies. Nevertheless, the direction is clear, and the pace of adoption is intensifying."

Prateek Jain adds, "Manufacturers have shifted from basic mechanisation to technology-led optimisation. India installed 8,510 industrial robots in 2023, a 59 percent jump over the previous year, which shows how quickly plants are modernising. The focus has moved to traceability, uptime and data-driven operations, especially as India now ranks 6th globally in annual robot installations. Companies increasingly want integrated automation rather than isolated equipment."

India’s robot density is still just 7 robots per 10,000 workers, far behind the global average of 141, which shows how much headroom remains. Prateek Jain says, "Automotive, electronics, FMCG, retail and 3PL are growing rapidly because they operate at large scale and require predictable output. These sectors contribute majority of India’s robot installations and automation spend. Traditional MSME-dominated sectors, like textiles and small metalworking units, are slower because investment cycles are longer and skilled resources are limited."

Production lines still lead adoption of robots, driven by the automotive and electronics industries. “The automotive sector alone deployed 3,551 new robots in 2023, accounting for over 40 percent of India’s installations. The fastest-growing adoption, however, is now in post-production. Warehouses and dispatch areas are adopting intelligent movement systems and AI-powered robots as companies look for seamless flow beyond the line. Digital twins are also being used to simulate entire material paths, allowing planners to optimise layouts and prevent congestion well before operations begin,” observes Prateek Jain.

Challenges in automation adoption

India’s automation landscape presents different pictures. Multinational manufacturers—especially in automotive, electronics and aerospace—are rapidly adopting automation to meet global standards for speed, quality and traceability. With established playbooks and rising concerns over quality lapses and labour attrition, they are driving large-scale integration. However, domestic manufacturers remain cautious.

Vivek Prasad explains, "There are many hurdles that deter the adoption of automation in Indian manufacturing plants. Lack of awareness is one of the most significant hurdles. Most companies have limited or inaccurate information about the extent of impact that automation can have on their operations. The cost benefit analysis generally does not cover all aspects of value or cost. The fact that automation is not a one-size-fits-all-solution but needs to be customised to a specific situation is generally ignored while making decisions. Some other hurdles include lack of trained resources to support implementation, social concerns due to job loss or redundancy and technical concerns around systems integration of fit-for-purpose equipment. All of these hurdles can be overcome simply by selecting the right partner and building a suitable business case for automation through a structured process of examination and decision making.”

Cost pressures and perceived risks continue to slowdown adoption of automation among domestic manufacturing firms. "The major hurdle in the implementation of automation is the high initial cost. Changing or modifying old equipment or machines is also quite challenging. The management and workers find it difficult to adapt to the changes in processes and a culture of just-in-time or zero inventory. Developing an exceptional and skilled workforce is a significant aspect that needs attention," says Dr Vivek Sunnapwar.

At the same time, it is often a challenge to build a compelling business case and accurately measure the return on investment, making it difficult to justify the expense to stakeholders. “Integrating new automation solutions with existing legacy systems is often complex and can lead to compatibility issues. Automation generates large volumes of data, which requires advanced systems for management, security, and analysis. Issues with data quality, availability, and bias can also hinder effectiveness,” observes Ramesh Bhorania, Vice President, Robotics & FA Division, Prama Hikvision India Pvt Ltd.

As systems become more interconnected, they become more vulnerable to cyber threats, which require robust security measures. Ramesh Bhorania says, “There is often a lack of internal expertise to implement and operate new technologies, and a need for extensive employee training. Employees may fear job displacement or struggle to adapt to new automated processes, leading to resistance from the workforce and a negative impact on the organisational culture. Navigating the complex and evolving landscape of regulations, standards, and compliance requirements for automated systems adds another layer of difficulty.”

On boarding MSMEs

By one estimate, India has over six million micro, small and medium enterprises (MSMEs)—a staggering number. They play an essential role in the industrial supply chain, but many lack the resources and technical expertise required to adopt automation independently. Vivek Prasad says, "For industrial automation to really take root in India, the SME segment in the manufacturing sector needs to embrace it. This can happen only when some of the myths surrounding automation like high initial cost, either zero-or-hundred percent and nothing in between, automation translates into job loss, etc. are dispelled. Various stakeholders in the automation ecosystem (OEMs, system integrators, consultants, users) need to come together to educate customers about the benefits of automation and demonstrate its power through experiments, pilots and business cases. As more and more companies begin to adopt automation in areas where it benefits them, they will realise that automation and mechanisation will co-exist in the Indian manufacturing sector atleast in the foreseeable future."

Interest for automation is beginning to surface among SMEs in India, but uptake remains gradual. Return on investment (RoI) remains the biggest barrier. Many local manufacturers expect payback within 18–24 months—an unrealistic timeline for most automation projects.

"The key hurdles in adopting industrial automation include high initial investment, the complexity of integrating new systems with legacy ones, and a shortage of skilled workers and cybersecurity concerns. Other challenges involve workforce resistance to job changes, difficulties in demonstrating a clear return on investment, and the need for reliable and high-quality data to train automated systems effectively. The cost of purchasing, installing, and integrating new equipment, software, and infrastructure can be a significant barrier, especially for small and medium-sized enterprises (SMEs)," opines Ramesh Bhorania.

Despite these hurdles, there is a growing belief that automation will become unavoidable as India’s middle class expands and quality expectations rise.

AI everywhere on the shop floor

Artificial Intelligence (AI) has emerged as one of the most powerful forces reshaping India’s manufacturing landscape. The last five years have seen unprecedented technological progress—much of it driven by the growing integration of AI at the edge, embedded directly into industrial automation systems. This shift is considered to be one of the greatest technological transformations in the sector with AI catalysing higher productivity, improving quality and reducing reliance on skilled labour.

Sameer Gandhi says, "From a technology perspective, the biggest shift has been the integration of artificial intelligence—especially AI on the edge. For example, detecting minute scratches on shiny metal surfaces is now possible due to AI-powered vision with significantly reduced teaching times. AI is also reducing dependency on highly skilled technicians. Earlier, retraining a PCB inspection system after design changes could take up to 90 minutes and required an expert operator. With AI-assisted systems, this can now be achieved in 5–10 minutes by a comparatively less skilled worker. In short, AI is helping compensate for labour shortages, enhance quality and improve productivity."

AI is transforming India's manufacturing landscape in several ways. Ramesh Bhorania, observes, "AI-powered machines and robots optimise production lines, minimising human error and maximising output. Automation is being adopted at very high rate in all manufacturing domains. Leading automotive companies are leveraging automation to improve productivity. Automation ensures consistent product quality by reducing variations and defects. For instance, robotic welding improves vehicle safety, while AI systems analyse data patterns to identify defects early in the production cycle."

AI also enables real-time monitoring across manufacturing processes, supporting timely interventions and more informed decision-making. Leading FMCG companies are already demonstrating this shift, leveraging AI-driven demand forecasting and robotic process automation to improve efficiency and responsiveness. “AI will play a transformative role across the value chain—from procurement to production and distribution. With AI-based demand forecasting, companies can minimise overproduction and food waste, while optimised production planning and quality prediction help lower energy consumption and rejection rates. Algorithmic sourcing ensures materials are sustainably procured, and AI-powered route optimisation reduces transportation emissions. This marks a shift from reactive to predictive sustainability management,” observes Anand Mishra.

Prateek Jain believes that AI can unlock the next wave of reliability and speed. “Plants already use AI for visual inspection, predictive maintenance and real-time flow optimisation. With India’s industrial automation market projected to grow from $ 7.5 billion in 2024 to nearly $ 16 billion by 2033, AI will be central to extracting maximum value from automation investments. We see rising demand for AI models embedded at the edge, where decisions need to be instant,” he explains.

Atul Patil feels AI will be a major catalyst in accelerating automation adoption across Indian industries, and its impact is already visible. “AI is enabling manufacturers to move beyond traditional automation toward intelligent, self-optimising operations. AI-driven analytics, predictive maintenance, machine-learning-based quality inspection and adaptive control systems are helping factories reduce downtime, improve yield and make faster decisions on the shop floor. Indian industries—especially automotive, EV, pharma, FMCG and electronics—are increasingly seeking solutions that can analyse data in real time and enhance process reliability.”

Data and AI enabled manufacturing future

It has been observed that many manufacturing sectors are putting advanced technologies on the job. Dr Vivek Sunnapwar says, “There is an adaptation of the Internet of Things (IoT) in many industries, wherein various parameters (temperature, pressure, force, vibration, etc) are monitored in real-time using different sensors. Advanced software strongly supports the hardware. AI–ML-based systems are pretty popular. Simulation and maintenance (predictive and proactive) software are aiding in the effective utilisation of the machines/equipment and hardware."

At the shop-floor level, Sameer Gandhi believes, data visualisation will be a transformative trend. He says, “Manufacturers want real-time insight into performance, bottlenecks and downtime. At the machine level, quality and safety will see accelerated focus. Customers increasingly demand higher-quality output and safer operations, and automation technologies will play a central role in achieving both.”

Prateek Jain adds, “Factories are moving toward flexible, software-defined operations. AI-powered robots, collaborative systems, shuttle-based storage and sensor-intensive AGVs are becoming standard features. Digital twins are increasingly used to model line behaviour, optimise inventory flow and validate layout changes before execution. On the software side, unified operating layers and edge analytics allow machines to make real-time adjustments, reducing downtime and improving consistency. The most prominent trend is the shift from static automation to dynamic, self-optimising systems that blend robotics, AI and data into a single decision-making loop."

Sometime failed early automation attempts discourage reinvestment. To overcome this, some integrators start with small pilots or by streamlining manual processes before introducing robotics. “Many companies are waking up to the benefits of automation and digitalisation. They are doing the right thing by starting with small proof-of-concepts (PoC) and experiments rather than making grand plans which are difficult to get buy-in for internally. PoCs could include retrofitting equipment with sensors to capture digital inputs, energy consumption monitoring to manage and optimise cost, creating digital twins where there is adequate data to analyse and model outcomes. Digital twins are a powerful method for companies to use historical data to model equipment behaviour as an early warning sign for a variety of issues. This is especially beneficial for companies that have mission critical equipment for which it is difficult to create total redundancy,” observes Vivek Prasad.

According to estimates, India could see over 40,000 new manufacturing facilities in the next five years presenting big growth opportunity for automation OEMs. Artificial intelligence is already reshaping how Indian factories operate—from quality inspection to safety, data management, and human–machine collaboration. Looking forward, AI is expected to become even more pervasive in manufacturing environments. As AI moves deeper into the edge devices that power modern production systems, manufacturers stand to gain unprecedented speed, accuracy and control.

“The pace of transformation will continue to accelerate. Increased adoption of edge AI will make machines smarter and processes more autonomous. Another major development will be the shift towards data-driven decision-making. Historically, data latency and system fragmentation prevented real-time analytics across multiple shop floors and geographies. This is changing rapidly," opines Sameer Gandhi.

For India to sustain its manufacturing momentum, adoption of advanced automation solutions will be central. With organisations increasingly embracing data-driven, automated processes, the country is well positioned to close the gap with global manufacturing leaders.

Prateek Jain opines, "The outlook is strong as India positions itself as a global manufacturing and warehousing base. Automation demand will grow consistently across factories, distribution centres and e-commerce networks. Local production of robotics and sub-systems is expected to rise, supported by stronger engineering talent and policy incentives. What will reshape the market, however, is the merging of hardware, AI and real-time software into integrated operating systems for factories. Over the next decade, Indian manufacturing will move toward environments that are connected, self-optimising and designed for continuous improvement rather than periodic upgrades.”

Indian manufacturing facilities are swiftly moving beyond standalone automation towards connected, intelligent, and scalable systems that support smart manufacturing and accelerate time-to-market. "Automation has already expanded its roots in India. Despite many challenges and hurdles, the Indian manufacturing sector is adopting automation in a significant way. With the Government providing all the support through initiatives like Make in India and a thrust on self-reliance, automation will usher in a new era and help achieve the desired contribution of 23-25 per cent to GDP," concludes Dr Vivek Sunnapwar.

Advantage Automation
Benefits of automation for Indian manufacturing sector:

Higher efficiency: With China and other countries operating at significantly larger capacities, Indian manufacturers must improve throughput and capacity utilisation to stay competitive. Automation is becoming essential to bridge this gap.

Greater flexibility: The ability to pivot quickly and capture emerging opportunities—without repeatedly rebuilding processes—is crucial as India works to strengthen its position in global supply chains.

Stronger unit economics: To secure a meaningful foothold in international supply networks, Indian companies must offer cost-competitive products. Automation helps deliver more consistent quality at lower operational costs.

Enhanced sustainability: As India pursues rapid industrial expansion, automation supports environmentally responsible growth—an important factor given the country’s long-term climate commitments.

What's Trending
Automation on shop floors and across machinery is advancing rapidly, propelled by new technologies and the growing demand for higher efficiency. These developments are reshaping the manufacturing landscape, helping companies boost productivity, enhance competitiveness, and lower both operational costs and environmental impact. According to Ramesh Bhorania, key emerging trends include:

AI & ML: Real-time monitoring, predictive analytics, autonomous decision-making, and improved machine utilisation and product quality.

Industrial IoT: Connected machines enabling predictive maintenance, smart operations, advanced quality control and adaptive production.

Edge computing: On-site data processing for low latency and real-time analysis, useful for firms with limited IT infrastructure.

Advanced robotics & cobots: Robots with sensors and 3D vision supporting complex assembly, mass customisation and safer human–machine collaboration.

Digital twins: Virtual replicas of production environments for simulation, predictive maintenance and process optimisation.

Private 5G networks: High-speed, reliable wireless connectivity for real-time monitoring and control across the shop floor.

Smart shop floor solutions: Integrated systems using AI, IIoT and edge computing to streamline operations, manage inventory and reduce downtime.

Manufacturing execution systems (MES): Real-time oversight of production, enabling better scheduling, resource allocation and quality control.

Virtualisation & software-defined automation: Flexible, scalable production enabled by virtualised shop floors and software-driven control.

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