India’s manufacturing journey is set to get better in 2025

Building on India’s advancements in robotics and precision engineering, the next frontier lies in harnessing the transformative power of AI and AI-human collaboration

By Prashanth Prakash

As India enters a transformative phase, 2024 was a landmark year for its entrepreneurial and industrial ecosystem. With $9.2 billion raised across 984 deals and 20 successful IPOs, the year underscored India’s growing ability to attract global investments and deliver strong exits. Global corporations like Airbus, Apple, Samsung, and Foxconn further validated India’s emergence as a reliable manufacturing hub with significant investments.

Looking forward to 2025, India continues to benefit from a combination of macroeconomic and geopolitical trends that strengthen its position as a global leader. The country’s skilled and youthful workforce, producing over 4 million engineers annually, provides the technical capability to address challenges across industries. Geopolitical tensions and the resulting China+1 strategy are prompting global companies to diversify supply chains and turn to India as a strategic alternative to traditional manufacturing hubs.

Additionally, stable governance, with a third consecutive term for the current government, offers a predictable and supportive business environment that encourages long-term investments.

The future of manufacturing

India is undergoing a transformative shift in manufacturing, evolving from addressing local challenges to creating globally competitive solutions. This journey is underpinned by four key pillars: precision engineering, robotics, R&D-led manufacturing, and defense. Together, these pillars reflect India’s ambition to redefine global supply chains, harness advanced technologies, and build self-reliance in critical sectors.

Precision engineering is at the heart of India’s manufacturing transformation, enabling the creation of world-class products for aerospace, defense, and automotive industries. Startups like Agnikul, JEH Aerospace, and Fabheads are leading this charge by developing high-precision components that not only meet but often exceed international benchmarks.

India’s vast engineering talent pool, combined with advancements in materials science, precision tools, and manufacturing processes, is helping bridge global capacity gaps. For instance, the global aerospace sector faces record-high order backlogs with constrained production capacity—a challenge India’s precision engineering capabilities can address. Airbus’s establishment of a Maintenance, Repair, and Overhaul (MRO) center in India underscores the country’s readiness to deliver exacting quality standards and support global supply chains.

R&D, the key to long-term competitiveness

While precision engineering establishes India as a key player in delivering high-quality and scalable manufacturing solutions, R&D-led manufacturing ensures the country remains at the forefront of innovation. By addressing the needs of rapidly evolving industries like specialty chemicals, biotechnology, life sciences, and advanced materials, India is creating a robust foundation for long-term global competitiveness. These key sectors are already witnessing robust growth. For example, the specialty chemicals sector is growing at an annual rate of 12 percent, contributing over $40 billion in exports annually.

Emerging areas such as clean energy, circular economy solutions, and agriculture further showcase India’s R&D potential. Companies like Biocon highlight the success of innovation-led manufacturing, while startups like ScimpliFy (accelerating product development through advanced R&D platforms) and S4S (innovating in food processing with clean energy solutions) exemplify how India is combining R&D and manufacturing to create unique global opportunities.

India’s natural resources and geographic advantages, coupled with its focus on sustainability, position it as a leader in creating solutions for a clean and circular economy. These efforts ensure that India remains at the forefront of industries demanding continuous innovation.

Building on advancements in R&D-driven manufacturing, India is integrating robotics into its supply chains, addressing labour shortages and enhancing consistency in global industries. India's robotics sector is transforming global industries by delivering consistent, high-quality outputs while tackling labour shortages and supply chain challenges. Startups such as Grey Orange, 10X construction and CynLr are leading the charge with AI-driven robotics solutions for logistics, manufacturing construction drawing substantial investment in 2024.

The global industrial robotics market is projected to reach $42 billion by 2030, with rising adoption in key markets like the US and Europe. In 2023 alone, the U.S. deployed 40,000 robots, while Germany adopted 26,000 installations. India’s capabilities, combined with the declining costs of robotic systems—from $46,000 in 2010 to $27,000 in 2017—enable its companies to tap into this growing demand.

Global giants like ABB, FANUC etc. are expanding operations in India, while domestic firms are exporting robotic solutions to sectors like automotive and aerospace. By integrating robotics into its industrial ecosystem, India is complementing its precision engineering strengths, solidifying its position as a global automation leader.

Transitioning from a global outlook to a focus on self-reliance, India is rapidly advancing its defense manufacturing capabilities. Driven by increased budget allocations and initiatives such as iDEX (Innovations for Defence Excellence), the sector has seen a remarkable transformation. With a defense budget of Rs 5.94 lakh crore (approximately $72 billion) in 2023-24, India is making significant strides in promoting indigenous innovation and minimizing dependence on imports.

Indigenization levels have surpassed 65% in key categories, aligning with India’s vision of creating a resilient and self-sufficient defense ecosystem. Startups like Aero, Nabh Dhristi, and Rekise are developing cutting-edge solutions such as armoured vehicles, aviation systems, and precision weaponry. These innovations not only bolster India’s national security but also enable exports to allied nations, enhancing its global stature in defense manufacturing.

India’s growing industrial base and government support are creating opportunities for private players and startups to innovate in advanced components and systems tailored to strategic needs. This ecosystem is positioning India as a global leader in defense manufacturing.

AI-Human collaboration: The symbiosis of the future

Building on India’s advancements in robotics and precision engineering, the next frontier lies in harnessing the transformative power of AI and AI-human collaboration to redefine productivity, decision-making, and innovation across industries. The software total addressable market (TAM) has expanded 10x due to AI, as AI-native solutions now undertake human-intensive workflows that were previously impossible.

As AI adoption accelerates, its limitations—such as a lack of judgment and contextual understanding—highlight the growing need for AI-human collaboration. Rather than replacing human expertise, AI complements it, creating hybrid systems that combine computational power with human intuition to solve complex challenges. We envision humans transitioning into oversight and creative roles, working alongside AI agents that handle intensive tasks.

India is uniquely positioned to lead this trend, not just as a volume producer of talent but as a quality producer. With globally recognized expertise in technology, data science, finance, accounting, legal, and compliance, India can build integrated AI-plus-human solutions. Companies like Qure.ai in healthcare exemplify the potential of AI-human collaboration, combining advanced algorithms with human oversight to drive innovation globally and Ema is unlocking the collaborative future of AI and human employees working together at large enterprises.

A transformative phase ahead

As 2025 begins, India is redefining global industries through a focus on manufacturing and AI-human collaboration. This transformation is powered by its engineering talent, cost efficiency, and expertise in scaling innovative solutions globally.

(Prashanth Prakash is Partner at Accel). 

Views are personal, and do not represent the stand of this publication.