Manufacturing MSMEs: AI as a Catalyst for Value Creation

AI Could Add Up to $149.9 Billion in Value for Manufacturing MSMEs by 2035: PwC India-ORF Report​

New Delhi, Saturday, March 7: Artificial intelligence is set to play a significant role in transforming India’s manufacturing sector, with the potential to add between $135.6 billion and $149.9 billion in value to manufacturing MSMEs by 2035, according to a joint report released by PwC India and the Observer Research Foundation (ORF).

The report highlights how the integration of AI across manufacturing processes could accelerate productivity, innovation, and competitiveness among micro, small and medium enterprises.

AI to Unlock Trillions in Manufacturing Growth​

The report states that India’s manufacturing MSMEs could unlock growth opportunities worth $3.13 trillion to $3.21 trillion by 2047 if key economic targets are achieved.

These projections are based on two key conditions:

• Manufacturing’s share of India’s GDP increases to 25 per cent.
• MSMEs raise their contribution to India’s manufacturing output from 35.4 per cent in FY 2023–24 to 50 per cent by 2047.

Under these conditions, the sector stands to benefit substantially from AI-led improvements in productivity and efficiency.

AI Adoption Expanding Beyond Large Enterprises​

According to Sanjeev Krishan, Chairperson of PwC in India, AI is increasingly becoming accessible to businesses of all sizes.

“AI is no longer the preserve of large enterprises. When deployed as a co-pilot, not a replacement, it can help MSMEs break out of the low productivity trap and compete on quality, speed, and innovation, while strengthening jobs and supply chain resilience,” he said.

Krishan added that the focus should be on a human-centric and ecosystem-led approach that ensures AI remains accessible, affordable, and practical for businesses.

AI Applications Across the Manufacturing Value Chain​

The report outlines multiple areas where AI could transform MSME operations across the manufacturing value chain.

These include:

• Predictive maintenance of machinery
• Energy optimisation in manufacturing processes
• Vision-based quality control on shop floors
• AI-enabled credit assessment
• Multilingual customer engagement
• Compliance automation
• Generative design for product development

Such applications could help businesses improve consistency, reduce operational costs, and meet international manufacturing standards more effectively.

Data Centres and Semiconductor Ecosystems Create New Opportunities​

The report also points to emerging opportunities linked to investments in data centres and semiconductor ecosystems.

Manufacturing MSMEs could participate in these supply chains by producing non-tech-intensive capital goods, including harnesses, cooling equipment, and industrial components.

This segment alone could open up a $100 billion to $150 billion manufacturing opportunity over time, according to the report.

Inclusive AI Adoption Key to India’s Industrial Transformation​

Samir Saran, President of ORF, said the future of AI in India will depend on how widely it spreads across the industrial economy.

“India’s AI moment will be defined not by frontier breakthroughs alone, but by how deeply and equitably AI diffuses across its industrial economy. MSMEs sit at the heart of this transformation,” he said.

Saran added that collaboration between policy makers, industry, and civil society will be essential to ensure AI adoption improves competitiveness while preserving employment and promoting inclusive growth.