ICICI Securities Pins Revival On Capex Recovery


The share of the manufacturing sector in the Indian economy is poised to hit a record high in the medium-term riding on capex cycle recovery, according to ICICI Securities.

“Manufacturing sector’s share in the Indian economy reached the pre-Covid level of 18% of GVA (gross value added) in FY22 and is poised to hit an all-time high in the medium term,” the brokerage said in an investor note dated Aug. 23.

Apart from a rebound in the capex cycle, factors such as government policy initiatives, sustained FDI inflows and export opportunities will aid as well, the brokerage said.

The Russia-Ukraine crisis, which has sparked an urgency towards self-reliance in energy and defence requirements, also creates large manufacturing opportunities for India, the note said.

India’s gross value added, a metric that measures the contribution of a business towards the economy, grew 22% year-on-year to Rs 33.10 lakh crore in fiscal 2022, constituting 18.2% of the GVA in real terms, ICICI Securities said.

“To be sure, the manufacturing sector as a percentage of GVA in real term has stagnated in the 17-18% range over the past decade after rising rapidly during 2002-2010 period driven by a strong capex cycle.”

ICICI Securities also highlighted that in fiscal 2021, the corporate sector’s share in manufacturing surged to a decadal high of 89%, even as the coronavirus pandemic impacted manufacturing by the unorganised or household sector.

The sectors within manufacturing, which lagged over the past nine years, could witness growth with help from imminent capex recovery, the note said.

These sectors include:

  • Machinery and equipment, which contribute 6.6% to GVA from manufacturing in corporate sector.

  • Electrical equipment, which contributes 3.4% to GVA from manufacturing in the corporate sector.

  • Fabricated metal products, which contributes 2.8% to GVA from manufacturing in the corporate sector.


Source link

What is your reaction?

In Love
Not Sure

You may also like

Comments are closed.

More in:Business