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Smart Factories in India: Reality or Distant Dream?
Articles- Jul 28,25
As India moves toward its goal of becoming a $7 trillion economy by 2030, embracing smart manufacturing technologies will be crucial for achieving this ambitious target, writes Rakesh Rao. But, is the Indian manufacturing sector ready for this digital leap?
India stands at the cusp of a major transformation in its manufacturing sector, driven by the global shift toward digitalisation and automation. The Indian manufacturing industry, which is expected to play a key role in achieving the country’s ambitious target of becoming a $7 trillion economy by 2030, is poised to embrace smart factory technologies that leverage automation, artificial intelligence (AI), Internet of Things (IoT), and real-time data analytics. The adoption of smart factories promises to enhance productivity, reduce energy consumption, improve product quality, and create a competitive edge for Indian manufacturers in the global marketplace.
Smart factories, or digitised manufacturing systems, are rapidly gaining traction in developed economies, and India is no exception. “When we talk about smart factories, these are no longer an option. They have become a necessity if India is to remain competitive globally,” points out Amit Pradhan, VP - IT & CIO, Dixon Technologies.
India's ambition to become a global manufacturing hub is predicated on the ability to modernise its manufacturing processes. The concept of smart factories, which utilises advanced technologies like IoT, AI, and machine learning to optimise production processes, is critical to maintaining competitiveness in the global market.
Smart factories are digitalised ecosystems that connect machines, devices, and sensors to collect and analyse real-time data, enabling manufacturers to make informed decisions quickly. These factories utilise connected devices and systems to optimise operations, improve efficiency, reduce downtime, and enhance product quality. This ability to harness real-time data is crucial for staying competitive, especially in sectors where speed, precision, and quality are paramount.
Pradhan explains, “Smart factories have become essential for India to maintain a competitive edge against other manufacturing powerhouses like China, Vietnam, and Taiwan. In countries like China, the adoption rate of Industry 4.0 is double that of India, and this gives them a strong competitive advantage.”
Early adopters of intelligent solutions
India’s manufacturing value chain has traditionally been fragmented, with OEMs operating at one end and ambitions for growth at the other—often connected by legacy systems and manual processes. “Smart factories are now bridging these gaps by creating a seamless digital ecosystem. OEMs increasingly demand real-time data from their suppliers, prompting many MSMEs to adopt cloud-based Manufacturing Execution Systems (MES). Even logistics partners are now synchronising their operations with factory data to optimise delivery routes,” says Sandeep Shukla, Digital Transformation Lead at Tata Electronics.
Experts observe digital transformation across the entire manufacturing value chain—upstream, midstream, and downstream.
In the upstream phase—design and engineering—simulation tools are enabling OEMs to validate designs virtually and perform Design of Experiments (DOE). This significantly reduces time to market and cuts prototyping costs.
In the midstream or production phase, IoT-enabled machines, AI-driven quality control, and automated workflows are enhancing throughput, minimising downtime, and ensuring consistent output.
In the downstream phase, real-time inventory tracking, demand forecasting, and connected logistics are driving efficiency by reducing waste and improving delivery timelines.
“In essence, smart factories do more than just modernise machines—they transform relationships and data exchange across the entire manufacturing value chain,” emphasises Shukla.
Challenges to surmount
Despite the evident advantages, smart factory adoption in India remains in its early stages. Several challenges need to be addressed before smart factories can become a mainstream reality, particularly for SMEs. One of the key hurdles is the significant upfront investment required for automation technologies.
“Smart factories are not just about upgrading machinery; they require significant investment in digital infrastructure, sensors, and connectivity solutions. While large companies in sectors like automotive have adopted smart manufacturing technologies, many smaller industries, such as textiles, foundries, and steel, are still operating with legacy systems that are not compatible with modern automation tools,” explains Sameer Kelkar, CEO & R&D Head, Grind Master Machines Pvt Ltd.
To address these concerns, it is important to have policy interventions that can provide financial incentives and tax breaks to SMEs investing in automation. “The government should focus on providing subsidies or low-interest financing for automation adoption, as seen in countries like Japan and Singapore,” suggests Pradhan. This would help offset the high initial costs and make automation more accessible to smaller manufacturers.
Additionally, integrating legacy systems with new smart technologies remains a major challenge. Sunil Mehta, Assistant Vice President – Head Customer Service, Factory Automation & Industrial Division (FAID), Mitsubishi Electric India, and President, Automation Industry Association (AIA), explains, “Older machines often lack the necessary connectivity and protocols to work with modern automation tools. To integrate these machines into smart factory systems, manufacturers need to retrofit them with sensors and data communication capabilities.”
One of the key hurdles in faster adoption of automation in Indian factories is the absence of cross-functional collaboration. Sunil Mehta elaborates, “Successful automation requires coordinated efforts from engineering, maintenance, and shopfloor operators—many of whom may have decades of hands-on experience. It's critical to involve these operators early, not only to leverage their expertise but also to assure them that automation is not a threat to their employment. Resistance to change, driven by job insecurity, can severely hinder adoption.”
Even when companies invest in automation systems, a lack of discipline in implementation often prevents them from realising expected results. “Systems are frequently bypassed or underutilised, especially in environments where operational discipline is weak. Without rigorous adherence to process, even the best technologies fail to deliver. That said, we have seen positive outcomes where implementation has been robust. Several Japanese and Indian automotive firms have successfully deployed automation solutions for energy monitoring, quality control, and productivity enhancement—delivering measurable improvements. But for such success, clarity in objectives and a detailed implementation roadmap are essential,” Mehta observes.
India’s Industry 4.0 landscape is uneven, and this disparity stems from sector-specific challenges and drivers. Automotive is leading the charge, primarily due to pressure from global OEMs and the need to meet international standards. The sector has embraced smart manufacturing practices to stay competitive. “Pharmaceuticals is another strong contender, driven by the need for compliance, precision, and traceability, all of which demand robust digital systems. The electronics sector is an emerging area, gaining momentum due to government-led Production Linked Incentive (PLI) schemes. While still nascent, it is poised for rapid transformation with the right digital infrastructure and investment. Overall, the pace of adoption varies, but with targeted policy support and increased awareness, more sectors can accelerate their Industry 4.0 journeys,” opines Shukla.
Smart workforce for modern factories
The successful implementation of smart factories hinges not only on the technology but also on the people who will operate and manage these systems. As smart factories involve the integration of advanced technologies such as IoT, AI, and machine learning, the need for a skilled workforce is more critical than ever.
Emphasising the importance of reskilling the workforce to meet the demands of smart manufacturing, Sandeep Shukla states, “Smart factories are about augmenting human capabilities, not replacing them. We need to equip workers with the skills necessary to work alongside machines and make the most of the technologies at their disposal.”
India’s demographic advantage — a young and growing workforce — provides a unique opportunity to train and reskill the next generation of workers for the future of manufacturing. “By 2030, India will have the world’s youngest workforce, with 70% of the population under 40. This is a huge advantage, but we need to invest in digital literacy and skills development to ensure that these workers are prepared for the smart manufacturing jobs of tomorrow,” opines Pradhan.
Experts believe there is a need for strong focus on upskilling the internal workforce, particularly middle management. Mehta elaborates, “Middle-level management must be trained to understand smart manufacturing concepts. They need to be equipped with the knowledge to drive digital transformation in their factories.” This includes training on operational aspects such as IoT integration, quality control, and data analytics, which are essential for the successful operation of smart factories.
Smart, yet green factories
Sustainability is a major concern for manufacturers worldwide, and smart factories can play a pivotal role in helping companies meet their sustainability goals. By optimising energy usage, reducing waste, and improving resource efficiency, smart factories contribute to environmental sustainability while enhancing operational efficiency.
Sameer Kelkar, who has set ambitious sustainability targets for his company, Grind Master Machines, explained that smart factories can help manufacturers track energy consumption and optimise production processes. “Smart factories can improve efficiency, reduce waste, and optimise resource use. This not only helps companies meet their sustainability targets but also leads to significant cost savings,” he said.
Elaborating on the role of smart factories in reducing energy consumption, Pradhan says, “By integrating automation and real-time data analytics, smart factories can cut energy consumption by 20-30%, which is crucial for meeting ESG (Environmental, Social, and Governance) compliance standards and driving long-term sustainability.”
To accelerate the adoption of smart factories, experts believe strong policy support from the government is essential. Pradhan suggests, “The government could create ‘shared digital infrastructure’ to enable SMEs to access automation technologies without having to bear the full cost of implementation. Innovation hubs and digital platforms should be created where SMEs can access the tools and expertise needed to implement smart technologies.”
It is also important to run digital literacy programmes for workers. “Digital literacy should be a key component of government policy, with programmes designed to equip workers with the skills they need to operate in a digital manufacturing environment,” says Pradhan.
Sustainability is not just about reducing energy consumption and waste but also about ensuring that the technologies used in smart factories are environmentally friendly. Kelkar emphasised the need for smart manufacturing to consider the environmental impact of materials and energy used in production. “We need to track the carbon footprint of every material we use in our manufacturing processes. This will help us make smarter decisions about sustainability,” he said.
Kelkar also stressed the importance of tracking energy consumption and optimising resource use. “Smart factories allow us to monitor energy usage in real-time and identify areas where we can reduce consumption. This is essential for meeting our sustainability targets and achieving long-term cost savings,” he explained.
Factories of the future
The future of Indian manufacturing is undoubtedly tied to the adoption of smart factories. While there are significant challenges in the path to automation, including high upfront costs, legacy systems, and skill gaps, these obstacles are not insurmountable. Through policy support, investment in digital literacy, and collaboration between the public and private sectors, India can unlock the potential of smart factories and become a leader in global manufacturing.
Smart factories are not just about automation; they are about creating a collaborative ecosystem where human workers and machines work together to achieve greater efficiency, sustainability, and innovation. By focusing on the integration of human and machine capabilities, upskilling the workforce, and fostering a culture of innovation, India can ensure that its manufacturing sector remains competitive and sustainable in the digital age.
As India moves toward its goal of becoming a $7 trillion economy by 2030, embracing smart manufacturing technologies will be crucial for achieving this ambitious target. By leveraging the power of smart factories, India can not only improve its manufacturing capabilities but also drive economic growth, job creation, and sustainability in the years to come.
(This article is based on the virtual panel discussion on "Smart Factories: The Future of Indian Manufacturing" - organised by Smart Manufacturing & Enterprises on July 22, 2025. The panel discussion was moderated by Rahul Bhandurge, Director of Sales & Business Development, BDB India Pvt Ltd)
Smart factories
Amit Pradhan
Dixon Technologies
digital manufacturing
Sameer Kelkar
Grind Master Machines
machine tools
micro finishing machines
Rakesh Rao
Sandeep Shukla
Tata Electronics
Digital Factory
automation
Sunil Mehta
Mitsubishi Electric
smart manufacturing
Rahul Bhandurge
BDB India
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