AI investment to boost six Indian sectors

India is set to gain significant manufacturing opportunities from a global artificial intelligence (AI) investment cycle of $3 trillion, with six key sectors expected to drive growth as the country reduces import dependence and strengthens domestic production capabilities, according to a report by Avendus Capital.

The six sectors identified by the report are defence and aerospace, space technology, robotics and automation, semiconductors, energy transition, and advanced materials.

The report identified 2027–28 as a crucial period for these sectors, as projects move from policy support and approvals towards commercial production.

Koushik Bhattacharyya, Managing Director and Head of Industrials Investment Banking at Avendus Capital, said, "India's new-age manufacturing opportunity is substantial, but its right-to-win manifests in select segments. With more than 80% of the $3 tn AI-infrastructure investment yet to be deployed globally, the India opportunity is driven by a trifecta of factors: a large sovereign and domestic demand base, deep engineering talent and robust policy framework."

"We have identified six sectors driving this wave, and 2027–28 will put to test India’s hard-tech ambitions as these sectors move towards commercialization," Bhattacharyya added.

According to the report, India's semiconductor consumption is projected to increase from $49.5 billion in 2025 to $106.5 billion by 2030. This is expected to create opportunities in chip design, packaging, testing and specialised materials, allowing Indian companies to strengthen their presence in the global semiconductor supply chain.

The country's space economy is also expected to grow from around $13 billion in 2025 to $44 billion by 2033. Meanwhile, domestic defence production is projected to reach approximately $31.6 billion by 2030.

The robotics market is another area of growth, with rising domestic adoption and import substitution expected to expand the market fourfold to $4.6 billion by 2030.

In clean energy, India is expected to expand its manufacturing capabilities across the supply chain over the next five years. By the end of the decade, the country could emerge as one of the few nations outside China with an integrated solar manufacturing chain, covering everything from ingots to modules.

The report also highlighted plans for multiple battery cell plants with capacities measured in gigawatt-hours, alongside commercial production of indigenous electrolyser stacks and rare-earth-free motor technology.

Advanced materials are expected to follow a growth trajectory similar to India's electronics manufacturing sector a decade ago, when strong domestic demand and high import dependence created opportunities for local production.

According to the report, recycling operations are likely to expand first, followed by battery materials. Rare-earth magnet production and specialised materials are also expected to gain momentum, supported by targeted government policies and demand from the defence and aerospace sectors.

The report noted that the coming years will be critical in determining whether India can translate domestic demand, engineering capabilities and policy support into globally competitive manufacturing businesses. – ANI