Home / Industry / Manufacturing /  Capex deployment under PLI expected to pick up from FY24: Icra

New Delhi: Capital expenditure of manufacturers is on the rise as the government’s production linked incentive (PLI) scheme has encouraged bids across sectors, but capex deployment is expected to pick up only in FY24 for more than 80% of the projected investments, ratings agency Icra said on Wednesday.

Investors are expected to pour in an additional 0.2-0.4 trillion in current fiscal with the capex seen rising to 1.7 trillion in FY26, the ratings agency said in its latest report that has captured the PLI scheme’s progress and capex deployment over the years. The assessment is based on some recent developments for large-scale projects such as semiconductors.

“Based on our calculations, the annual CAPEX from the PLI schemes is expected to cross 1 trn from FY24 and may peak out at 1.7 trn in FY26. Hence, FY24 could be an inflexion point for a surge in India’s manufacturing CAPEX," Rohit Ahuja, Head of Research and Outreach, ICRA, said.

In some of the sectors, such as mobile phones/electronics, engineering goods, food products, wherein production has started (over FY22 or H1 FY23), the impact is visible in the surge in export data for these sectors. These can be primarily attributed to PLI schemes for these sectors, Icra said.

Semiconductor and ACC batteries form 70% of the major pending capex deployment. The Indian semiconductor and electronics sector is expected to grow at a CAGR of 30-35% for the next five years. Further, regulations by the US to limit exports of semiconductor and chip-making equipment to China will benefit India in the future. Five applicants under the semiconductor and display fabrication PLI scheme are expected to manufacture 1.2 lakh wafers per month.

The government has set up India Semiconductor Mission to support applicant entities. ACC batteries PLI scheme has been approved by three entities. The government may increase the PLI outlay for the same (as done for the solar module), witnessing additional 40 GWh capacity applications in initial bidding.

The government is also contemplating launching PLI schemes for a few more sectors (containers, electrolyser, power transmission equipment, etc.) to ensure manufacturing capex continues to remain elevated beyond FY26

“However, in the wake of rising input costs, and unfavourable economic conditions, execution delays in certain sectors could be a concern," said Ahuja.

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