Readiness Assessment and Adoption Barriers for Industry 4.0 Technologies in Indian SME Manufacturing: An Empirical Study Using AHP and Structural Equation Modelling

Abstract

Industry 4.0 - encompassing the Internet of Things (IoT), Cyber- Physical Systems (CPS), Big Data analytics, cloud manufacturing, and additive manufacturing - represents a transformative paradigm for industrial production. While large enterprises in developed economies have made significant strides in 14.0 adoption, small and medium enterprises (SMEs) in emerging economies, particularly India, face distinctive structural and contextual barriers that have received limited systematic empirical investigation. This paper presents findings from a structured survey of 218 manufacturing SMEs across six industrial clusters in India (auto- components, textile machinery, machine tools, engineering plastics, food processing, and pharmaceuticals). An Analytical Hierarchy Process (AHP) framework was deployed to prioritise Industry 4.0 readiness dimensions, and Structural Equation Modelling (SEM) was employed to test a hypothesised barrier- adoption model. Results indicate that financial constraints (path coefficient β = 0.61), digital skill gap (β = 0.54), and lack of standardised infrastructure (β = 0.48) are the dominant adoption barriers. Technology awareness and managerial commitment emerge as significant moderators of adoption intent. Sectorwise analysis reveals notable heterogeneity: auto- component SMEs demonstrate significantly higher readiness (mean readiness score 3.82/5) compared to textile machinery SMEs (2.74/5). Policy implications and a tiered adoption roadmap for Indian manufacturing SMEs are proposed.