How robust industry outlook is boosting equity market growth?

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manufacturing output. Historically, India has not been strongly oriented towards manufacturing as a core economic focus. However, the long-term policy is changing, giving equal importance to domestic industries.

The government is revamping the industry’s norms and regulations with a vision of self-sufficiency and to become the manufacturing hub for the world. To attain this goal, the initial phase involves enhancing both the quantity and quality of fundamental infrastructure assets through an increased allocation of government funds. Frankly, the government’s fiscal position had become robust, led by financial reforms increasing the corpus size.

Over the past five years, government capital expenditure has seen a remarkable 23% CAGR, reaching to ₹7.3 trillion, accounting for 2.7% of GDP. In the first quarter of FY24, the government has already utilized ₹2.8 trillion, which constitutes 27.8% of the allocated annual capital expenditure for FY24. Two-thirds of the Center’s capital expenditure in Q1FY24 was incurred on the construction of roads and railway infrastructure.

The government's unwavering commitment to infrastructure development through initiatives like NIP, GATI Shakti, and budget allocations has resulted in a robust order book, a promising project pipeline, improved profitability, and enhanced return ratios, providing a significant boost to the infrastructure sector. The alternative strategy is to stimulate the industrial sector by offering financial incentives for capital expenditure and other financial aids, such as reducing effective taxes. In 2019, the basic corporate tax rate was slashed from 30% to 22% (excluding surcharges and cess), thereby enhancing cash flows and potentially boosting future private