India’s manufacturing sector has entered a decisive phase, with Industrial AI moving beyond pilot projects to scaled, shopfloor-level deployment. A new report by YourNest Venture Capital, in collaboration with Praxis Global Alliance, states that 90 per cent of Indian manufacturing enterprises are already experimenting with AI, while capital investment is only beginning to catch up.

The report identifies Industrial AI as one of the most under-penetrated yet high-potential opportunities in India’s DeepTech ecosystem, with funding projected to grow ten-fold to $1.5 billion by 2030.

The transition is being driven by what the report calls a ‘Productivity Stack’ effect, where AI delivers measurable bottom-line impact across the manufacturing value chain. It highlights 30–50 per cent reductions in unplanned downtime, 10–40 per cent decreases in conversion costs, 5–15 per cent yield improvements, and throughput increases of up to 30 per cent.

The report also introduces the ‘Output Uplift’ lens, positioning Industrial AI as a macro-economic catalyst. By optimising existing assets, Industrial AI can unlock incremental manufacturing capacity equivalent to around $150 billion in output by 2030, without proportional physical expansion or heavy greenfield capital expenditure. This makes Industrial AI a critical enabler of India’s self-reliance and global supply chain resilience.

While funding currently stands at $150 million in 2024, the report notes a deepening of capital commitment. Average deal sizes increased nearly fourfold to approximately $8 million between 2021 and 2025, indicating a shift towards conviction-led, scale-oriented investments.

Sunil K Goyal, Managing Director & Fund Manager, YourNest Venture Capital, said, “In India, enterprise adoption of industrial AI has significantly outpaced capital deployment at this pivotal moment. The end-customer is sending out a signal that is being picked by startups who are developing powerful products to make shopfloors more efficient and profitable. We ourselves are seeing increased traction with our early bets in Industrial AI where quantifiable ROI, is lowering downtime, increasing throughput, and optimising costs. In spite of this, financing is still disproportionately low given the magnitude of the potential. This gap makes it attractive for far-sighted investors to get involved now in creating IP-led, high-impact DeepTech businesses. At YourNest, our focus is on funding globally competitive Industrial AI leaders from India in our next fund.”

Ram Soni, Partner, NextGen Industrials, Praxis Global Alliance, said, “India’s manufacturing sector is entering a decisive decade. The factories that win will be those that move beyond pilots embedding AI as a shopfloor-first capability with clear, measurable impact on OEE, downtime, yield, and energy. This report captures the ground truth of where that transformation stands today: what is working, what is not, and what manufacturers, founders, and investors must do next to unlock the full potential of intelligent manufacturing in India.”

The report positions Industrial AI as a high-Return on Capital Employed lever for the sector. With payback cycles as short as 12–18 months, the business case for scaled adoption has become stronger for enterprise CFOs and institutional investors.

Unlike traditional software-as-a-service solutions, Industrial AI is deeply embedded within physical manufacturing processes, creating higher entry barriers and stronger defensibility. While legacy system integration and data readiness remain challenges, the report notes that these are being addressed as part of broader digital transformation efforts.

The findings indicate that India’s Industrial AI sector is at a tipping point. As enterprises embed AI into core operations and investors close the structural funding gap, Industrial AI is expected to play a central role in shaping the next phase of India’s manufacturing growth and global competitiveness.