“Manufacturers who have clarity on where technology investments can create an enduring effect and on building the personnel capability to extract value from these investments will simply march ahead.” Amogh Giridhar, Associate Partner, Prequate Advisory
The manufacturing story in India has, for the longest time, been one in the making. The twist in the plot: The back office has now learnt to build things for the world, and the world is taking notice. That’s not your normal pivot but a dramatic rewrite of what the world’s largest workforce has quietly been building.
It isn’t just my faith in the sector; it’s the data that backs it. FDI into India’s manufacturing sector has increased 69% [IBEF]. PLI schemes have driven much of this across sectors. Let’s take mobile phone production: India has transformed from a negligible contributor to a global export powerhouse. Moving up the value chain are sectors such as Electronics, Pharmaceuticals, and Automotive components. The shop floor is where the consequential shift is happening, and these are not purely headlines.
Technology is fulfilling a key role in manufacturing, reshaping the industry. The looming question for investment decisions in 2026 and beyond is where to allocate capital.
The structure juncture
The industry is clearly at a point where investments and decisions made now will compound over the next decade. The PLI scheme, the Digital India initiative, and the China plus one strategy are real and have contributed US$ 165 Bn in investment [ITA].
There are opportunities that simply did not exist a few years ago, but they are available only to companies that can prove reliability, traceability, and consistent quality. The ability to demonstrate these capabilities largely depends on fundamental technology.
Promoters must deliberate on how and where technology can enable a sustainable competitive advantage. Investing with this certainty and not being swayed by the next shiny object will be the key. With the policy environment more encouraging than ever, these promoters’ ambitions are well-founded. The ones that will benefit are those who approach this as the operating logic of a modern business.
Gap frequently missed
Hardware investments are important, but not the only ones that matter. Be it Robots, CNC machines, or assembly line automation: the conversation is necessary but incomplete. A 2024 CII survey suggests that 45% of SMEs cite budget constraints as a key hurdle to deploying smart manufacturing technologies [Straits Research].
The issue, while it may look like a simple financing problem, doesn’t stop there. The growing concern is the shortage of people capable of delivering the operational outcomes of these technology investments. Investing in machinery is part of the problem solved. The ability to get both consistent and measurable improvement for the realization of the investment requires a very different capability.
India does have good engineering talent at the top, but the cracks surface in the middle layer. The quality manager who can understand what the data is signalling, and the plant manager who can comprehend a dashboard. These are some of the investments beyond the hardware that are relatively undervalued, and the reason why a promoter may fail to realize their technology investments.
The baseline shift
A few years ago, automation in a manufacturing setup simply meant replacing manual operations with machines. While that definition is met, its significance has changed. According to a NASSCOM report on Industry 4.0 adoption in India, spending on digital technologies as a percentage of overall manufacturing expenditure has grown from 20% in 2021 to 40% in 2025 [Invest India].
The growth potential of the Industry 4.0 market reinforces this. From US$ 5.5 Bn in 2024 projected to reach US$ 26.7 Bn, growing at a CAGR of 19.2% [Straits Research]. These numbers reflect investments across the sector, with infrastructure following suit.
PLI: An accelerant and not a subsidy
The narrative around PLI often centres on incentive payouts. This completely undersells the impact the scheme has created. By Mar 2025, under the PLI scheme, realized investments had reached ~₹1.76 lakh crore across 14 sectors, resulting in over 12 lakh direct and indirect jobs [PIB].
The scheme’s structure is linked to outcomes and has forced the adoption of technology. The incentives are tied to incremental production and sales, rather than a subsidy without a tracking mechanism. This means participants can’t afford to keep legacy systems. PLI has clearly worked as an accelerant for tech adoption that vanilla capital subsidies ever have.
As global companies continue to expand their footprint in India, FDI in manufacturing has also increased. The concentration of this inflow is seen in sectors where digital readiness is already visible. Simply, manufacturers who have invested in technology attract more capital, which fuels further investment.
Where the real decisions are made
The technology stack is getting more complex by the day. The investment choices now depend heavily on a factory’s position on its own maturity curve. It’s difficult to find a single right answer for capital allocation.
Ashok Leyland achieved a 10-15% gain in productivity [P&S] and improved traceability after implementing an IoT-based manufacturing process assurance system across its assembly lines. It is a significant gain, especially for a company of their scale. The brownfield upgrade delivered on connectivity and data visibility, resulting in practically immediate value.
Predictive maintenance is probably the most accessible and effective entry point. Sensors that flag deviations before failures can turn into unplanned maintenance nightmares and significantly reduce downtime. The ROI calculation for such an investment is a no-brainer.
Unlike other hardware and digital investments, the cost of a predictive maintenance pilot is within the reach of a serious mid-sized manufacturer.
If integration of data across the value chain is required, let’s say from procurement through dispatch, it makes for a harder investment case. ERP implementation or modernization, real-time inventory visibility, and supplier digitization aren’t the most glamorous or the ones that deliver immediate metric improvements. However, they make the factory legible to global customers, bankable for institutional lenders or investors, and scalable beyond the promoters’ direct oversight.
In conclusion, what will differentiate businesses that scale from those that do not is the quality of their investment decisions. Technology is no silver bullet. Neither a single platform nor equipment can transform the business. Manufacturers who have clarity on where technology investments can create an enduring effect and on building the personnel capability to extract value from these investments will simply march ahead. The infrastructure is improving, and global demand is picking up. The only thing needed is deliberate action.
The author is Amogh Giridhar, Associate Partner, Prequate Advisory
