The manufacturing theme can be played in several ways apart from the traditional China+1 and Production-Linked Incentive (PLI) schemes ways, said Vikas Khemani, Founder of Carnelian Asset Advisors. And it can result in a virtuous cycle of wealth creation, he added.
Till lately, most consumption depended on imports from China. Thanks to the unbeatably low rates of Chinese goods, manufacturing had become a pain point for India. So, there was an acute need to address the challenge of the low share of manufacturing in India’s gross domestic product (GDP).
In 2013, India’s manufacturing sector accounted for 14% of the GDP. Ten years later, that share hovers around the same number. However, the government is aiming to enhance the share of manufacturing in GDP to 25 percent within a decade, while also creating 100 million jobs.
Higher contribution of manufacturing will lead to higher capital expenditure. This should help increase the purchasing power of the people, which, in turn, will have a multiplier effect. This could also help reduce India’s imports.
“This would invariably lead to a cycle of wealth creation in the market,” said Khemani at a Crystal Gazing Summit and Awards 2023, organised by PMS AIF WORLD.
PMS AIF WORLD, is a new-age investment services online platform focused in the space of alternative investments offering analytics and strong content backed quality investment solutions to the HNIs, UHNIs & NRIs.
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He believes the government is committed to making sure local industry thrives and gets opportunities as well as protection from the unfair competition coming from China. “This has helped in building the Indian ecosystem,” he said.
Considering India is in the process of building an ecosystem, Khemani is of the view that the manufacturing theme is yet to be played out and sees many direct and indirect beneficiaries.
The manufacturing theme is a long decadal trend. So, he believes the whole theme is yet to be played out.
According to him, there are two ways to play the theme. One way is to look at the direct beneficiaries like specialty chemicals, active pharmaceutical ingredients (APIs), consumer electronics, defence, capital goods, toy and footwear manufacturing, and engineering and building material. The other is to look at staffing companies and several other derivative companies.
He believes there are many companies that are at an early stage, and which can grow 5 or 10 times in the long run.
However, even as the long-term outlook is strong, he cautions there will be hiccups. He sees the manufacturing space right now like the Information Technology (IT) space looked like in the mid-90s.
Just like the toy and footwear manufacturing space, even if there are not many opportunities available in the market now, Khemani believes there will definitely be some players a few years from now.
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