Listen to this article
The report released by DSP Mutual Fund shows that the manufacturing sector will play a major role in India’s GDP in the coming decade. The report states that the share of the manufacturing sector in GDP will rise from 14% in FY24 to 21% in FY34.
The report also indicates that by FY 2034, the sector is expected to triple in size, growing from USD 459 billion in FY 2024 to USD 1.66 trillion. This growth rate is higher than the average increase of USD 175 billion seen over the past decade.
In a press release, Charanjit Singh, Fund Manager, DSP Mutual Fund, said, “Manufacturing as a % of GDP is struggling at 14% for India while for other Asian countries, it is much higher at over 20%. We continue to be positive on the manufacturing theme as we believe most segments are at the cusp of a significant pickup in demand, which would drive earnings growth for the companies. We are witnessing companies adding capacities to meet the increased demand as supply has not kept pace.”
Further, the report shows that investments in infrastructure is expected to rise from 33% of GDP in FY24 to 36% by FY29. However, to avoid issues like inflation spikes or project delays, the sector needs to increase their capacities.
DSP MF report also reveals that India's Production Linked Incentive (PLI) policy could result in major capital expenditure. It is expected that various sectors will invest around USD 39 billion between FY 2024 and FY 2026. While current PLI investments are focused on pharmaceuticals, mobile phones and solar PV modules, investment is expected to expand in sectors such as electronics, specialty steel, textiles and automobiles by FY 2025. Sectors like power, defense, water and manufacturing are mainly driven by demand rather than by external factors.
Singh said, “The last 5 years focused on key reforms by government and policy changes. We believe that the period from FY25-30 is going to be about execution. Also, private capex which had been weak for a very long time could witness revival from FY26 led by rising utilization levels, strong corporate balance sheets and political stability.”
