India's manufacturing is all set to expand with robust foundations of reforms: Nuvama report

New Delhi [India], August 21 : India's manufacturing sector, contributing 17 per cent to the nation's GDP, has positioned the country as the sixth-largest manufacturing economy globally. However, with just 3.1 per cent of the world GDP, there is significant potential for expansion says a report by Nuvama, a wealth and investment company
The stage is set for a new era of growth fuelled by recent reforms and strategic initiatives of the government.
Over the past decade, key reforms such as the Make in India initiative, the Unified Payments Interface (UPI), the Real Estate Regulatory Authority (RERA), the Insolvency and Bankruptcy Code (IBC), the Goods and Services Tax (GST), the Production Linked Incentives (PLI) scheme, and the China + 1 strategy have collectively laid a robust foundation for India's manufacturing sector.
These reforms have resulted in stronger balance sheets, increased capital availability, and reduced receivable days, creating a fertile ground for investment opportunities across diverse themes.
India's manufacturing landscape is witnessing a paradigm shift, with investment opportunities stretching across a broad spectrum of sectors.
Infrastructure projects encompassing roads, airports, railways, and ports are at the forefront, alongside burgeoning sectors such as Defence, Electronics Manufacturing, the Electric Vehicle (EV) ecosystem, Energy Transition, and Data Centres.
These sectors are acting as powerful tailwinds, propelling India's manufacturing prowess to new heights.
The current capex super-cycle is being driven by over 400 corporates and 600 unlisted entities spread across 35-plus industries, marking a stark contrast to the previous cycle, which was led by 80-plus corporates across five to six industries.
With more diversified funding sources, this cycle is poised for sustained growth, offering numerous avenues for investment.
The power sector, for instance, is seeing significant investments with a market size of Rs 65 billion for power transformers and Rs 63 billion for distribution transformers. Capacitors and switchgear (HV & LT) markets are also substantial, valued at Rs 7 billion and Rs 49/326 billion, respectively. Meanwhile, the market for cables (LV & HV) stands at Rs 662 billion, with insulators, energy meters, transmission towers, and conductors also drawing significant investments.
The government's Make in India initiative has been a game-changer for the defence sector, particularly through the Defence Acquisition Council's Defence Procurement Procedure (DPP) and capital acquisition proposals aimed at modernizing the armed forces.
The Indian defence ecosystem is undergoing a complete transformation, with a focus on catering to domestic requirements while also boosting exports.
Key initiatives include the establishment of two defence corridors in Uttar Pradesh and Tamil Nadu, aimed at reducing imports and promoting exports.
The government has also released four indigenisation lists for platforms, weapons, systems, and equipment, alongside three lists for sub-systems and assemblies. Foreign Direct Investment (FDI) in the sector has been enhanced to 74 per cent through the automatic route and up to 100 per cent through the government route.
The Department of Defence Production (DoDP) plays a crucial role in India's defence manufacturing, focusing on indigenisation and the production of advanced systems for the armed forces.
Defence Public Sector Undertakings (DPSUs) contribute approximately 60 per cent of India's overall defence production, underpinning the country's self-reliance in defence.
The indigenisation drive has gained momentum with the release of positive indigenisation lists of sub-systems, assemblies, and major equipment, ensuring a steady increase in domestically produced defence items.
For example, the DPSUs' first indigenisation list, released on December 27, 2021, comprised 351 items, of which 277 have already been indigenised. Subsequent lists have continued this trend, showcasing India's growing capabilities in defence manufacturing.
Moreover, portals like iDEX and Srijan are fostering innovation and technology, with the Srijan portal listing imported products to encourage domestic manufacturing.
The offset policy, requiring foreign vendors to reinvest at least 30 per cent of their contracts in the Indian defence sector, further strengthens India's self-reliance journey.