India’s PLI-linked CAPEX to pick up from FY24

The PLI schemes introduced by government are set to come to fruition, as the deployment of capital expenditure (CAPEX) through these schemes is expected to surge in FY2024. Among various sectors under the PLI scheme, the semiconductors and ACC batteries are set to form around 70% of the major pending CAPEX deployment.

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Ratings agency ICRA, in its latest report, stated that the investors are expected to pour in an additional ₹ 0.2-0.4 trillion in current fiscal with the CAPEX rising to ₹ 1.7 trillion in FY26. Among various sectors under the PLI scheme, the semiconductors and ACC batteries are set to form around 70% of the major pending CAPEX deployment. As per Rohit Ahuja, Head of Research and Outreach, ICRA – “FY24 could be an inflexion point for a surge in India’s manufacturing CAPEX”. However, “in the wake of rising input costs, and unfavorable economic conditions, execution delays in certain sectors could be a concern,” he added.

The ICRA report further stated that in some of the sectors like mobile phones/electronics, engineering goods, food products where the production had started in FY22-FY23, the surge in export data is noticeable.

Speaking of semiconductor and ACC batteries, the sector is expected to grow at a CAGR of 30-35% for the next 5 years. Moreover, regulations by the US to limit exports of semiconductor and chip-making equipment to China will also benefit India in near future.

To further elevate the CAPEX beyond FY26, the government is contemplating in launching PLI schemes for more sectors like containers, power transmission equipment, electrolysers, etc.