Smart Factories and Automation in India – How IoT and AI are driving efficiency in Indian Manufacturing

By Sudhanshu Mittal, Head & Director, Technical Solutions, Meity Nasscom CoE

The Indian manufacturing sector stands at critical crossroad as it undergoes a technological revolution by adopting the IoT (Internet of Things) and AI (Artificial Intelligence). As global competition intensifies and consumer demands shift towards customisation and efficiency, Indian manufacturing still grapples with inefficiencies, high production costs, and inconsistent quality standards. Many factories continue to rely on manual processes, outdated machinery, and fragmented supply chains, leading to lower productivity, increased waste, and supply chain bottlenecks.

These challenges highlight the necessity of digitisation and automation, which Indian manufacturers need to embrace to unlock higher productivity, cost savings, and global competitiveness while ensuring sustainability and resilience in the face of economic disruptions.

As we search for different kind of IoT & AI based solutions available in the market, we find that there is lot of information available about how different kind of solutions impact the factory production. Some of the examples are given here:

1. IoT-enabled sensors and smart devices continuously collect and transmit real-time data from machines, production lines, and environmental conditions including the energy consumption. This leads to identification of bottlenecks and inefficiencies in production process, compliance with quality and safety standards (especially critical for industries like pharmaceutical and food processing).
2. Analysis of sensor data from machines leads to predictive maintenance and minimises the unexpected downtime, which leads to improved production forecasting.
3. Use of AI for improved demand forecasting and analysis of raw materials / finished goods / logistics aspects to lower inventory cost thereby reducing the overstocking or shortage situation.
4. IoT & AI can play critical role in energy management and optimisation of resource usage, thereby helping manufacturers towards their sustainability goals. Smart meters and sensors provide the real time energy consumption across machines and production units, AI is utilised to identify how energy usage can be changed dynamically and thereby reducing wastage.
5. Use of wearable devices by workers help in monitoring their health and movement across hazardous zones in real time. The devices track the heart rate, fatigue levels, and location to ensure safety, especially in high risk environments. Similarly, AI powered cameras are able to detect the unsafe practices, unauthorised accesses, fire etc, and automatically trigger the alarm.

Several leading Indian manufacturing players have already started adoption of IoT & AI in their operations and are experiencing the benefits in the form of enhance efficiency, reduce costs, and improve quality. The adoption of IoT enabled sensors on critical machinery to track performance in real time, use of AI driven predictive algorithms to analyse the collected sensor data and deployment of AI based vision system for defect detection have led to as much as 20% reduction in unexpected machine breakdown, 15% increase in production efficiency and reduction of defect rates by as much as 25% in automotive company. Similarly, integration of solutions like AI powered robotic arms for precision assembly and reduction of human errors, installation of IoT based sensors across plant for energy consumption monitoring and production scheduling optimisation and AI driven demand forecasting have led to 10% increase in production without any additional cost, 30% reduction in energy consumption and inventory cost reduction due to improved forecasting.

Such case studies highlight how IoT and AI are transforming Indian manufacturing, enhancing efficiency, reducing waste, and improving overall competitiveness.

While the technology adoption is able to generate production efficiency improvements and impact the bottom line, there are also challenges especially for SME players. Some of the challenges are listed below:

1. Initial investment and unclear ROI – deploying the sensors, AI solutions and their training requires upfront capital expenditure. The ROI will be medium term and some aspects of this will be intangible (e.g. better forecasting allowing them to meet more orders on time) where it will be hard to put monetary benefit figure. This can be potentially addressed through government support and OPEX model of deployments.
2. Legacy machinery and integration issues – large numbers of players use old machines which are not ready for connectivity. While there are external solutions which have been developed, those are reasonably expensive and don’t provide clear information about the worthwhile monetary benefits. To address this, step-by-step approach is needed where small deployment is undertaken and depending upon the benefits, it is scaled up.
3. Lack of skilled workforce – adoption and utilisation of solutions require skilled workforce as well. Most of the SME players don’t have internal workforce that is capable of deriving benefits from the advanced technology solutions. To address this, there are various skill development programs initiated through government collaboration which industries can use.
4. Resistance to change – change management is a critical area. The adoption of technology will bring transparency in the operations and in large number of cases there is resistance from workers on floor due to this transparency. This requires a partnership between management and shop-floor workers where they need to be explained that the objective is not to punish them but to help them become better at their jobs.

Indian manufacturing industry needs to go for IoT & AI adoption if it wants to stay relevant. While there are challenges with technology adoption, those can be addressed. It has been seen clearly that technology adoption provides clear benefits to the bottom line, however internal change management is needed. Governments across country are providing different kind of support towards digital technology adoption. Manufacturing players have the opportunity to work with industry associations like Nasscom and use their expertise to start their digital technology adoption journey.