India on the verge of capex recovery in coming years: Prabhudas Lilladher

India is on the verge of a new capital expenditure cycle recovery with the central government spending big on infrastructure, said Prabhudas Lilladhar, a financial services player.

In its latest report, Prabhudas Lilladher said there will be a big capex cycle recovery in India in the coming few years as the private sector capex is showing signs of revival.

Even though the Central government is spending big on infrastructure, there has not been industry led capex cycle, the report added.

According to Prabhudas Lilladher, the FY23 budget has increased the capex plans of the Centre by 10.6 per cent to Rs 12.2 trillion.

The National Infrastructure Pipeline (NIP) worth Rs 11,000 billion and resolve to provide amenities like roads, drinking water and housing will keep the Centre’s capex high.

The productivity linked incentive (PLI) worth Rs 2,000 billion across 14 sectors and benefits from China plus one in Specialty chemicals, Textiles and others will revive capex, the report added.

Similarly capex by the steel, cement, textiles, oil and gas and other sectors will push the capex higher.

According to the report, a strong demand in 2Q of the current fiscal is expected given early Diwali and sustained pent upAdemand from urban middle class in discretionary segments.

3Q will benefit from improvement in margins given that cost pressures are abating as most Agri commodities (led by Palm Oil) have corrected to March levels and crude has softened from recent highs by 30-40 per cent.

In addition, prices of steel, aluminium, copper and others have seen corrections of 52 per cent, 38 per cent and 25 per cent from the peak.

Global supply chain seems to be in better shape and semiconductor shortage appears to be ebbing now.

“We expect strong growth in corporate profitability in 2Q and 3Q which would support markets. Any revival of rural demand would be an icing on the cake,” Prabhudas Lilladher report notes.

However, the rural demand has failed to pick up so far despite strong prices as higher costs for inputs, deficient rains in large states and a volatile environment is impacting the sentiments.

Decline in acreage in key crops like paddy and oilseeds can impact food inflation in coming quarters.

Festival demand from urban middle class is expected to remain strong, which will enable good 2Q and 3Q will show benefits of correction in commodities.

–IANS

vj/ksk/

(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

Dear Reader,

Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.

We, however, have a request.

As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.

Support quality journalism and subscribe to Business Standard.

Digital Editor