Electric vehicles (EVs), semiconductors, and electronics are set to drive capital expenditure (capex) in India's emerging sectors from now until FY2028, according to a report by investment firm ASK Capital. This shift accompanies resurgence in India’s manufacturing sector, fuelled by policy reforms.

Capex for the manufacturing sector was approximately $264 billion over FY2019-2023, averaging around $53 billion annually. Emerging sectors accounted for only 5% of this total capex. However, ASK Capital predicts a significant change.

The report estimates that from FY2024-2028, emerging sectors are expected to account for about 27% of total capex. This growth is driven by the focus on green transition, supply chain re-alignment, and benefits under the Production Linked Incentive (PLI) scheme. Consequently, average annual capex is projected to increase by around 40% to approximately $74 billion annually during this period.

The bulk of non-PLI emerging sector capex—about 85-90%—will go into EVs, semiconductors, and electronics. The report highlights that the transition towards sustainable energy sources and the establishment of semiconductor hubs in India are key drivers of this momentum.

India is strategically positioning itself as a global manufacturing hub as part of its economic goal of reaching a $5 trillion economy. This confidence stems from recent reforms aimed at boosting manufacturing competitiveness. Initiatives such as "Make in India" and the PLI Scheme have focused on simplifying business processes, attracting foreign direct investment (FDI), and promoting local manufacturing. Notable examples include Taiwanese tech giant Foxconn’s plans to invest $1.67 billion in its upcoming facility and Vietnamese automaker VinFast’s plant construction in India.

From 2014 to 2022, FDI equity inflows into the manufacturing sector surged by 57%, signalling growing international confidence in India's manufacturing capabilities.

Given these reforms, the contribution of manufacturing to India’s GDP is set to rise to around 20% by FY2030, up from the stagnant 15 to 18% over the last two decades. Additionally, manufacturing GDP growth is expected to reach around 9% over FY2023-2030, compared to around 6% over FY2011-2020. 

(Source: MSN)