Indian industrial manufacturers are betting on artificial intelligence more heavily than their global peers, but a new PwC study finds their innovation ambitions falling well short of China’s. Just 16% anchor their strategy in product leadership, against 63% of Chinese manufacturers – a gap that could cap margins and export sophistication.
The findings come from ‘Rewriting the rules: The next chapter of Indian industrial manufacturing’, published in July by PwC. The study draws on a survey of 443 industrial manufacturers worldwide, including dedicated samples of 51 companies in India and 51 in China. It lands as India works towards its stated ambition of a $7.5 trillion manufacturing economy by 2047.
Industrial manufacturers – the makers of machine tools, industrial equipment and precision components – supply the country’s infrastructure, defence and export sectors. The choices they make over the next five years, PwC argues, will decide whether India becomes a force in global production networks or stays anchored in the low-value end of the industrial value chain.
The technology push
Of the 51 Indian manufacturers surveyed, 59% expect artificial intelligence to play the most important role in reaching their strategic goals over the next five years, against 52% of the 392 respondents elsewhere.
The ambition runs across the value chain. The share automating data capture and analytics to a large extent is set to rise from 51% to 82%, and automation of customer interaction from 39% to 63%. By 2030, the proportion of manufacturers with highly automated physical production processes is expected to more than double.
Where Chinese manufacturers point automation at procurement and the shop floor, Indian firms aim it at the customer. PwC’s caution is that the technology itself is not the differentiator. “Technologies alone will not take us ahead. It’s how we integrate them into our strategy that matters,” said a founder of a leading industrial medium-sized enterprise quoted in the report.
The innovation gap
A cluster analysis places 45% of Indian manufacturers in a customer-centric strategic archetype and a further 39% in operational excellence. Only 16% are anchored in product leadership and innovation – the lowest share of the five countries measured, and roughly a quarter of China’s 63%.
Investment intent points the other way. Some 57% of Indian respondents name product design and development as the part of their value chain due for the largest increase in spending. Yet only 39% count R&D, product development and product management among the top three capabilities that will lift financial performance, against 76% in China.
The mismatch shows up in what they sell. Indian manufacturers are moving into servitisation and solution-led monetisation, layering services on top of products whose core research and differentiation remain underfunded. PwC calls that a dependency trap, tying revenue growth to borrowed platforms and external intellectual property rather than to owned differentiation.
The report’s term for the wider pattern is ‘confident stagnation’: companies that believe they are ready to transform but lack the executional and cultural scaffolding to deliver. Indian manufacturers report high organisational confidence, yet 51% name the quality and speed of strategic decision-making as the single largest barrier to changing how they create and capture value.
The competition is not waiting. Nearly half of global respondents, 49%, expect South Asia to become more important for revenue growth, and Chinese manufacturers – 43% of whom target original equipment manufacturers with intelligent, connected products, against 18% in India – are entering the segments Indian firms consider their own. Without product innovation of their own, PwC warns, they risk selling yesterday’s solutions to tomorrow’s customers.