Industry 4.0 can help manufacturing sector contribute 25% to GDP by FY26: Report

Industry 4.0 can help manufacturing sector contribute 25% to GDP by FY26 and enable India’s manufacturing sector to become an intelligent industry and achieve the national growth target of $1.1 trillion by FY26, according to a Nasscom-Capgemini report titled, ‘India Industry 4.0 Adoption: A Case to Mature Manufacturing Digitalization by 2025’.

From comprising 5% of manufacturing IT spend in 2011, to 20% by 2021, industry 4.0 has witnessed over a decade of transition since 2011. It has also grown by 9.6 times during the same period, from $10.5 billion in 2011 to $103 billion in 2021, driven by business growth, resilience and sustainability needs. 

According to the report, investments in Industry 4.0 have grown by approximately 10X in the last decade and are expected to grow to over $200 billion by 2025. 

Countries such as US, UK, China, India and Brazil are expected to supplement this with new investments, amounting to a total of over $100 billion. This investment will predominantly be in digital technologies like IoT, AI/ML, IT-OT integration, robotics, and human-machine interfaces. These will account for almost 40% of all manufacturing technology spend. 

“Servitization, integrated customer and employee experience, and an urgent need for flexible operations and business agility are set to be the biggest drivers of Industry 4.0 in the next decade,” the report said. 

“Industry 4.0 has reached a tipping point in Indian manufacturing, with a strong desire to boost investments in the next two years to create exceptional customer experiences and long-term business models. Moving forward, it will be fascinating to watch how ready the Indian manufacturing industry is to adopt and scale industry 4.0, which is largely determined by the use cases selected, the capacity to scale Proofs of Concept, and the alignment of IT and OT capabilities,” said Debjani Ghosh, president, Nasscom. 

Commenting on the potential of industry 4.0 to build interconnected factories of the future, Ananth Chandramouli, managing director and head of the India Business Unit, Capgemini, said, “It is evident that by 2025, more than two-thirds of the Indian manufacturing sector will embrace intelligent industry 4.0. This research shows that this decade is going to experience an amalgamation of Digital Insider (sensors and embedded software in products), Digital Continuity (creating and managing virtual worlds) and Digital Convergence (digitalization of core processes in an extended ecosystem)." 

With accelerated investment in foundational tech like cloud and IoT, the Indian manufacturing sector has started pivoting to digitalization, cites the report, with $5.5-6.5 billion spent on Industry 4.0 in FY21. This accounts for nearly 50% of the annual technology spend by Indian manufacturers. 75% of this is led by discrete manufacturers in Auto, Electricals, and Electronics, while Chemicals and Pharma are leading the process manufacturing segment. 

MSMEs (Micro, Small and Medium Enterprises) in India account for 33% of the manufacturing output and 45-50% of exports, across textile, food processing, chemical, and electrical or equipment. 

The report concludes that industry 4.0 is at an inflection point in Indian manufacturing. There’s an urgent need to increase investments in the next 2 years and drive a rapid shift from proof-of-concept to a more ROI driven, outcome-based deployment.  

Over the next 18-24 months, enterprises in the sector need to prioritize investments across emerging connectivity tech, big data analytics, central and remote-controlled monitoring, and process automation. These new investments will consist of a combination of scaling-up existing IoT and cloud deployments for rapid PoC-to-production of new use cases and industrial automation.