India's engineering research and development (ER&D) sector is projected to surpass $100 billion in revenue by 2030, driven by the integration of Artificial Intelligence (AI) into core engineering workflows, according to IT industry body Nasscom. The sector, which is estimated to generate $63 billion in revenue in FY26, is witnessing a significant shift as engineering becomes increasingly software-defined, data-driven and intelligent. As reported by Nasscom, global ER&D spending is projected to reach $2.48-2.50 trillion by 2030, growing at a CAGR of 8-9 per cent between CY24 and CY30. With an estimated revenue of $63 billion in FY26, India's ER&D services revenue is projected to cross $100 billion by 2030. The growing adoption of AI is changing the nature of work available to ER&D providers, as companies can now participate in more stages of the product lifecycle, from development and testing to operation and optimisation.
According to Nasscom's report titled 'Physical AI Redefining ER&D opportunity for India', demand will evolve in three distinct phases. The first phase will see the scaling of intelligent products and operations, connected equipment and predictive maintenance. This will be followed by a surge in simulation, virtual engineering and intelligent manufacturing as companies move from experimentation to production. Over the longer term, Nasscom expects autonomous systems to emerge as the largest opportunity as barriers related to safety, reliability, compute, and real-world deployment are progressively addressed. Physical AI is emerging as a significant opportunity for the sector, with applications across autonomous systems, robotics, intelligent products and industrial environments. The adoption of Physical AI is expected to develop in stages, with intelligent products and operations such as embedded AI, connected equipment, predictive maintenance and intelligent inspection likely to see adoption first as companies integrate AI into existing systems.
The shift is expected to unlock new revenue streams beyond traditional services, including AI-as-a-Service (AIaaS), Robotics-as-a-Service (RaaS), leasing models and agentic deployments. As highlighted by Nasscom, India is well-positioned to become a critical engineering layer for the global market, leveraging its existing strengths in AI, embedded systems, automotive and industrial ER&D, simulation and data engineering. These capabilities could allow Indian providers to develop reusable intellectual property (IP) and participate across the Physical AI lifecycle. However, capturing this opportunity will require greater focus on cross-disciplinary talent, strategic platform and ecosystem partnerships, and domain-specific models to convert real-world data into systems and processes that can continuously improve.
According to Nasscom President Rajesh Nambiar, India's ER&D growth will be shaped by how effectively the country combines its engineering depth with AI to take on greater ownership of global product development. As reported by Nasscom, "Physical AI adds an important new dimension to this opportunity. India has the engineering talent, domain expertise and scale to play a much larger role across this lifecycle. The opportunity now is to move further towards systems-led engineering and co-creation of intelligent products and platforms." The report emphasizes that India has the engineering talent, domain expertise and scale needed to expand its role in developing intelligent products and platforms. The shift could create new revenue models for Indian ER&D companies, including AI-as-a-Service, robotics-as-a-Service, leasing models, autonomous platforms and agentic deployments, positioning India to take greater ownership of global product development.
