According to The Economic Times report, listed Indian corporates reported record reserves and surplus of Rs 66.04 trillion as of March 31, 2021, up 17 per cent from Rs 56.48 trillion as of March 31, 2020. The aggregate value of investments of about 4000 listed companies - who posted more than Rs 6.5 trillion profits in FY21 - were at an all-time high of Rs 86.78 trillion in FY21 compared to Rs 67.55 trillion a year ago. Sitting on healthy cash reserves and aided by stronger balance-sheets post Covid, the report says that these companies are looking to step up their capital expenditure (capex) and investment plans.

Last year due to Covid pandemic, every company pulled up their socks and enforced good cost control. Gradual lifting of lockdown re-started economic activity that is gathering momentum with unhindered movement of people and goods across the country. As a result, order flows and cash generation are better than normal.

Developed countries, where majority of people work in the formal sector and were able to maintain their income levels during the Covid pandemic, witnessed faster economic recovery which provided exports opportunity for Indian companies. On the other hand, in a developing country such as India, where 83 per cent of the labour force is employed in the unorganised sector, for majority of the people to reach pre-Covid income levels will take longer time. The first step towards revving up recovery process is increasing capex by large corporates. Hopefully that process has begun.

According to CRISIL Research, the stage is set for private investment cycle with new growth triggers in place. Typically, approximately 15,000 manufacturing firms spend Rs 3.2-3.5 trillion annually, with a big chunk of the capex being invested by large firms. The past decade - especially during fiscals 2013-2017 - witnessed a relatively muted private industrial capex cycle on weak demand, strong supply and leveraged balance sheets. While 2018-2020 did see a revival, it was largely led by regulatory capex in the oil & gas and automotive space (emission norms compliance) and large metal firms. Then the Covid pandemic struck, causing sector-wide capex deferral.

Now, CRISIL anticipates 30 per cent increase in industrial investment in FY22-24 triggered by government incentives such as Production-Linked Incentive (PLI) scheme, rising merchandise exports, global liquidity and an upward commodities cycle. According to the rating agency, capex would have likely taken nearly two years to touch pre-pandemic levels without the PLI scheme, which is applicable for 13 sub-sectors and is expected to generate Rs 2.2 trillion worth of capex over the scheme period (3-4 years).

Indian economy is projected to grow at 9.5-10.5 per cent in FY22 with growth expected to gain momentum in the second half of FY22 on cyclical tailwinds such as pent-up demand, growing export orders and higher capex spending by the government & private sector. However, stakeholders will have to keep a close watch on the recent supply-side disruptions caused by rising commodity & input prices, high freight costs and domestic coal shortages.

Along with this IPF Edition of Nov 2021, we are circulating “SMART MANUFACTURING” supplement that highlights on how to make plants smarter by investing in advanced automation and digital tools for maximising productivity.

Industries are banking on innovative and cost-effective solutions to enhance efficiency by optimally using available resources. If you have any products and technologies that add value to your industrial customers by helping them increase profitability, then they are fit to compete for winning the coveted annual IPF Industrial Excellence Award. Companies who have shown outstanding performance and consistent growth can also apply for IPF Awards - the nominations for which can be filled online on https://www.ipfonline.com/awards/. You can also SCAN the QR Code given below to know more about the Awards.

In addition, you are also welcome to be a part of the 50^th IPF Annual Edition - scheduled for release in January 2022 - which will focus on the dual theme of Sustainability and Digitalization, along with other industry trends.

Pratap Padode