NextFin News - India is currently at a critical juncture in its industrial development, with a growing consensus among industry experts and policymakers that accelerating artificial intelligence (AI) and industrial automation is essential to unlock the country's manufacturing potential. According to a December 2025 report by Ionic Wealth titled "The Make-in-India Upgrade: Advanced Manufacturing Trends," India must rapidly adopt AI-led innovation, automation, and frontier technologies to achieve its manufacturing ambitions and avoid a significant GDP shortfall by 2047.
The report highlights that under a business-as-usual scenario, India's manufacturing GDP would reach only $2.3 trillion by 2047, far below the $7.4 trillion potential aligned with the Viksit Bharat vision. This gap underscores the urgency for decisive action to integrate AI, robotics, digitization, and process innovation into manufacturing operations.
Recent developments illustrate this momentum. On January 10, 2026, Pune-based Bharat Forge, a leading Indian multinational in safety-critical components, signed a memorandum of understanding (MoU) with Germany-based Agile Robots SE to collaborate on AI-driven robotics and intelligent industrial automation. This Indo-German partnership aims to deploy advanced automation solutions across civilian manufacturing sectors such as automotive, healthcare, and consumer electronics, focusing on vision- and AI-based robotic systems to enable fully autonomous factory operations.
Government reforms have also laid a strong foundation for this transformation. Initiatives such as the implementation of labor code reforms, GST rationalization, easing of foreign direct investment (FDI) norms, land reforms, and infrastructure modernization under the PM Gati Shakti program and the National Logistics Policy have improved the ease of doing business and facilitated industrial growth.
Large-scale investments further signal confidence in India's manufacturing future. For example, Micron's $2.75 billion semiconductor assembly plant and Google's $25 billion commitment to digitization and AI-led data centers exemplify the growing inflow of capital into advanced manufacturing and technology sectors.
Looking ahead, the report projects that emerging and production-linked incentive (PLI)-linked sectors will contribute 27% of industrial capital expenditure over the next decade, with annual capital expenditure rising from ₹4.3 lakh crore in FY21-FY25 to ₹7.1 lakh crore in FY26-FY30. Sectors such as advanced electronics, clean energy, next-generation automotive technologies, aerospace, and AI-cloud-cyber stacks could collectively drive $1.4 to $1.9 trillion in GDP growth by 2035.
The adoption of frontier technologies—including AI/machine learning (ML), robotics, digital twins, 3D printing, advanced materials, and smart grids—is estimated to boost India's manufacturing GDP by an additional $1.1 trillion. NITI Aayog has emphasized that advanced manufacturing is no longer optional but foundational for India's global competitiveness in the coming decade.
India's manufacturing sector faces several challenges that make AI and automation imperative. The traditional labor-intensive model is increasingly unsustainable amid rising labor costs, global competition, and the need for higher productivity and quality standards. AI-driven automation can reduce operational costs, improve precision, and enable flexible manufacturing systems that respond swiftly to market demands.
The strategic collaboration between Bharat Forge and Agile Robots exemplifies how Indian firms are leveraging international expertise to accelerate technology adoption. Agile Robots, founded in Munich in 2018, brings cutting-edge AI-driven robotic automation capabilities, while Bharat Forge contributes deep domain knowledge and manufacturing scale. Their joint efforts to develop bespoke, modular automation solutions tailored for India and Southeast Asia markets will likely enhance manufacturing efficiency and competitiveness.
From an economic perspective, accelerating AI and automation aligns with India's broader goals of increasing manufacturing's share in GDP, creating high-value jobs, and integrating into global value chains. The transition to advanced manufacturing can also support sustainability objectives by optimizing resource use and reducing waste.
However, realizing this vision requires addressing barriers such as technology adoption costs, skill gaps, and infrastructure limitations. Policymakers must continue to incentivize R&D, facilitate technology transfer, and invest in workforce upskilling to ensure inclusive growth. Public-private partnerships and international collaborations will be critical in scaling AI and automation technologies across diverse manufacturing segments.
In conclusion, India's manufacturing growth trajectory hinges on its ability to embrace AI-led innovation and industrial automation. The combination of government reforms, strategic investments, and emerging partnerships positions India to close the manufacturing GDP gap and achieve its Viksit Bharat vision. As global manufacturing evolves rapidly, India’s proactive adoption of frontier technologies will determine its competitiveness and economic resilience in the decades ahead.
Explore more exclusive insights at nextfin.ai.
