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“Smart Ways for MSME Manufacturers to Compete and Win”
Signs of Strong Expansion
The Indian manufacturing sector has shown strong signs of expansion. The Manufacturing PMI (Purchasing Managers’ Index), which tracks critical factors like new orders, output, employment, suppliers’ delivery times, and stock of items purchased, reached 59.1 in July 2025. This is one of the highest ratings of the index since July 2022.
In FY 2024–25, FDI in the manufacturing sector increased by 18%, reaching $19.04 billion compared to $16.12 billion in the previous fiscal year (2023–24). Companies like Apple and Foxconn have increased iPhone assembly in India by 60%. India’s electronics manufacturing output touched $115 billion in 2024. The Production Linked Incentive (PLI) scheme alone has an outlay of $6.7 billion over five years for the automobiles and auto components sector.
The Underlying Challenge
However, data from the Udyam portal reveals that 75,082 MSMEs have shut down across all sectors in India from July 1, 2020, to February 28, 2025. Of these, 35,567 closures occurred in FY 2024-25 alone. That is nearly 50% of all shutdowns in this five-year period.
On the other hand, the recently concluded Free Trade Agreement (FTA) with the UK could pose potential setbacks to Indian industries such as Iron, Aluminium, Fertilizer, Cement, and Automobiles. Additionally, new trade tariffs imposed by the USA and overall global economic uncertainty are creating pressure. Rising cost of living, inflation, and stagnant wages have led to slower demand and more cautious consumer spending. Futuristically, the increasing impact of AI on labour is changing the income landscape.
So, where is the disconnect?
Where does this place the Indian MSME-based manufacturing sector?
What is the outlook?
Signs of Strong Expansion
The Indian manufacturing sector has shown strong signs of expansion. The Manufacturing PMI (Purchasing Managers’ Index), which tracks critical factors like new orders, output, employment, suppliers’ delivery times, and stock of items purchased, reached 59.1 in July 2025. This is one of the highest ratings of the index since July 2022.
In FY 2024–25, FDI in the manufacturing sector increased by 18%, reaching $19.04 billion compared to $16.12 billion in the previous fiscal year (2023–24). Companies like Apple and Foxconn have increased iPhone assembly in India by 60%. India’s electronics manufacturing output touched $115 billion in 2024. The Production Linked Incentive (PLI) scheme alone has an outlay of $6.7 billion over five years for the automobiles and auto components sector.
The Underlying Challenge
However, data from the Udyam portal reveals that 75,082 MSMEs have shut down across all sectors in India from July 1, 2020, to February 28, 2025. Of these, 35,567 closures occurred in FY 2024-25 alone. That is nearly 50% of all shutdowns in this five-year period.
On the other hand, the recently concluded Free Trade Agreement (FTA) with the UK could pose potential setbacks to Indian industries such as Iron, Aluminium, Fertilizer, Cement, and Automobiles. Additionally, new trade tariffs imposed by the USA and overall global economic uncertainty are creating pressure. Rising cost of living, inflation, and stagnant wages have led to slower demand and more cautious consumer spending. Futuristically, the increasing impact of AI on labour is changing the income landscape.
So, where is the disconnect?
The combined effect of tariffs, FTAs, inflation, lower RBI repo rates, AI, and other global trends is yet to be fully seen. But one thing Indian manufacturing MSMEs will notice sooner is rising global competition.
- Lower tariffs imposed by the US on some of our competitors like Vietnam, Cambodia, Brazil, and Indonesia place Indian products at a competitive price disadvantage. To balance this, we must enhance our product value.
- The FTA with the UK allows for cheaper imports of medical devices, auto components, beauty products, fish, and lamb. Indian producers in these segments now have to compete with the quality standards of UK counterparts. Although Indian textiles, footwear, pharma, chemicals, and agri-products will gain better access to UK markets, they may still face non-tariff barriers in the form of stringent consumer expectations and regulatory norms.
- Domestic consumption pressure is at an all-time high. We have reached the threshold of shrinkflation, where consumers are ready to switch to better and cheaper alternatives. Brand loyalty is eroding rapidly.
How do we navigate through this?
Government incentives like the PLI scheme, Make in India movement, and PM Internship Schemes can provide the spark but not the fuel for the long run. Initiatives such as FDI liberalization are underway. The Union Budget for 2025–26 has allocated ₹2,500 crore for the development of 12 industrial parks under the plug-and-play model. There is also ongoing work around overhauling GST norms, implementing new labour laws, and enhancing quality and safety standards through the Omnibus Technical Regulation (OTR) Order, 2024, effective from August 28, 2025.
However, these are macro-level initiatives where companies have limited direct control.
What can we do?
To become more efficient, deliver best-in-class products, and match rising customer expectations in a global economy, a smart solution lies in the effective use of technology.
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Internet of Things (IoT)
The Internet of Things enables MSMEs to connect machines, sensors, and systems across the shop floor, warehouse, and logistics chain. This real-time connectivity transforms how manufacturers monitor operations, respond to faults, and maintain quality control. A small-scale textile manufacturer can install IoT-enabled temperature and humidity sensors in the dyeing unit to maintain optimal environmental conditions. If deviations are detected, the system can automatically adjust ventilation or send alerts to technicians. This will help preserve fabric quality and reduce rework.
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Data Analytics
MSMEs generate vast amounts of data – from procurement and production to sales and customer service. However, without proper analysis, this data is simply an underutilized asset. An electronics manufacturer can analyze past sales trends, seasonal demand spikes, and customer buying behaviour to accurately forecast demand. This allows better inventory planning, avoiding overstocking or stockouts. Analytics can also be used to track machine performance, energy consumption, and employee productivity, helping businesses identify bottlenecks on the production floor. Financial analytics can allow better cost management and pricing decisions. For D2C brands customer data can further be analyzed to personalize marketing efforts, fine-tune product features, or offer targeted discounts, improving customer satisfaction and retention.
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Artificial Intelligence (AI)
AI is becoming essential for MSMEs that want to stay competitive. From smart automation to predictive modeling, AI technologies can substantially improve both the up-stream and down-stream of manufacturing operations. In a small automobile components factory, AI-powered visual inspection systems can detect defects or deviations in manufactured parts with far greater accuracy and speed than manual inspection. This leads to fewer product recalls and improved customer trust. In customer-facing areas, MSMEs are using AI chatbots and virtual assistants to respond to client queries, take orders, and provide after-sales support round the clock. This ensures a professional and responsive customer experience, which is crucial in retaining B2B and B2C clients.
The Path Forward
Understanding the power of IoT, Data Analytics, and AI is one thing; implementing them effectively is another. For many MSMEs, the path to technological adoption is filled with challenges – high initial costs, a lack of in-house technical expertise, and the complexity of integrating separate systems into a single workflow to name a few.
This is precisely the gap that Zaufany is built to fill. We believe that the power of digital transformation should be accessible to every MSME, not just large corporations. The challenges facing Indian manufacturing MSMEs are significant, but the opportunity to innovate and lead has never been greater.
Let Zaufany be your trusted partner in building a more efficient, competitive, and future-ready manufacturing enterprise. Contact us today to learn how we can help you turn your potential into business success.