Artificial Intelligence is expected to play a major role in shaping the future of India’s manufacturing sector. A new study suggests that the technology could significantly boost growth for small and medium enterprises over the next decade.
According to a report titled “Unlocking the AI Edge for MSMEs” by PwC, AI integration could contribute between $135.6 billion and $149.9 billion to the manufacturing MSME sector by 2035. This projection assumes that MSMEs account for 50% of the country’s manufacturing value added.
The report also estimates that MSMEs could unlock growth opportunities worth $3.13–$3.21 trillion by 2047. However, this would require India to increase the manufacturing share of GDP to 25%. At the same time, MSMEs would need to raise their share in manufacturing gross value added (GVA) from 35.4% in FY 2023–24 to 50%.
Researchers describe this transformation as an “exponential 19x leap in value creation.” Achieving this would require MSMEs to adopt AI technologies on shop floors and become active participants in global value chains.
The report also highlights a strong demand-side opportunity. MSMEs can supply non-technical manufacturing products used in AI infrastructure and chip production. These include “harnesses, chambers, cooling equipment, and other non-technical manufacturing products.” The market for such products is estimated between $100 billion and $150 billion.
AI itself is expected to contribute $1.7 trillion to the overall economy by 2035, while investment needed for AI infrastructure could reach $500 billion.
The study further notes that non-tech-intensive capital goods account for 20–30% of capital expenditure in such projects, an area where MSMEs already maintain a strong presence.
By integrating AI into operations, MSMEs can overcome traditional limitations in design, quality control, and decision-making. According to the report, this allows firms to “leapfrog structural and operational constraints” and “escape the low-productivity trap.”
AI adoption could help MSMEs reposition themselves as “competitive value creators rather than cost-based suppliers.” Key applications include predictive maintenance, vision-led quality control, and intelligent inventory management. AI tools supported by local language models can also simplify user interfaces and reduce the need for specialised technical skills.
The report describes AI’s impact through 3 roles: a “Scaler” that reduces processing time, an “Enricher” that supports human decision-making, and a “Reinventor” that changes how value is created and captured.
To guide this transition, the study proposes a “3A2I framework” built around “access, acceptance, assimilation, implementation, and institutionalisation.”
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