Manufacturing in India Sees 210% Jump in FY22; Private Investment Picks Up: Goldman Sachs


New investments and ordering activities have seen a sharp pick-up in the financial year 2021-22, and the manufacturing sector, which has lagged for multiple years, saw a jump of 210 per cent, compared with the previous financial year 2020-21. The sector witnessed a 460 per cent jump in 2021-22 as against 2019-20, according to a report by Goldman Sachs.

The report added that while the increase was aided by megaproject announcements (especially in the steel sector), the number of projects announced also increased by 80 per cent and 140 per cent in FY22 as compared with FY21 and FY20, respectively.

The growth was contributed by both traditional sectors like petrochemicals, steel, cement and automobiles, and new-age sectors like electronics, e-vehicles, data centers, it added. “Contract awarding saw an overall increase of 55 per cent year-on-year in FY22, and the manufacturing sector saw an increase of about 135 per cent y-o-y. Growth in awards for Infra has been decent as well, primarily driven by higher activity in the road sector.”

Goldman Sachs also added that tenders saw an increase as compared with FY20/ 21. “However, compared to FY18/19, the overall tendering activity (which is primarily for government orders) has been flattish indicating lower levels of activity in the next few months from an award perspective.”

It said new capital expenditure or investment announcements by the private sector witnessed a 145-150 per cent jump in 2021-22, compared to FY21/FY20. Manufacturing was the key growth driver for both capex and orders in FY22.

“March witnessed broad-based improvement in indicators (including diesel, petrol, electricity demand, container volumes and railway freight) compared to February and on the year-on-year basis. The relatively strong March data drove low-to-mid-single-digit y-o-y growth on average for 4QFY22, despite the impact of Omicron and a tough base — a positive for our cement, EPC (engineering-procurement-construction), and port companies,” the report said.
The Production-Linked Incentives Scheme

As a push to the Make in India (MII) initiative, the government had proposed production-linked incentive (PLI) schemes for 13 sectors during FY21, at a proposed incentive outlay of USD 26.7 billion (or Rs 1,97,000 crore), excluding the PLI scheme on semiconductors.

Following approval of the automobiles and auto components PLI (albeit at a proposed incentive outlay of Rs 26,100 crore as against the initial proposal of Rs 57,000 crore), all the 13 proposed PLI schemes have been approved by the Cabinet. Ten have received and approved bids with an incentive outlay of Rs 1,10,800 crore, excluding incentives for food products. Currently, applications are being invited for the ACC battery, textile and specialty steel PLIs.

The report said engineering goods exports remained strong in February (at USD 9.4 billion), up 33 per cent year-on-year. “We’ve included the monthly engineering goods exports data, to help track the impact and progress in manufacturing activity from the various government schemes (including production-linked incentive scheme).”

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