Interim Budget 2024-25: Infrastructure likely to get a capex thrust

Increase in outlay in line with industry expectations

The proposed ramp up in capital expenditure (capex) outlay during Thursday’s interim Budget announcements augurs well for metals, building materials and engineering companies, said industry executives and analysts.

The increase in outlay is in line with the industry’s expectations of infrastructure-led demand for metals, construction, engineering and building materials.

Many of these industries have already lined up mega capacity additions in anticipation of an infrastructure-led demand surge in the coming years.

FY25’s capital expenditure outlay is estimated at Rs 11.11 trillion, a 17 per cent rise from the revised estimates (RE) of Rs 9.5 trillion for FY24.

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This, coupled with announcements on railway corridors, train coach upgrades and other infra spends, is expected to keep core sector companies busy in the next few years.

Dilip Oommen, president of Indian Steel Association, and chief executive officer (CEO), AM/NS India, said, “This should translate into robust domestic steel demand, spurring private investments and job creation.”

Further, expansion of rural housing, along with the proposal to develop three economic railway corridors, will also spur steel demand, said TV Narendran, CEO and managing director (MD), Tata Steel.

India’s steel demand has been growing over 8 per cent, largely aided by the infrastructure push. Major steel makers are also undertaking capacity expansions, anticipating that India’s steel demand will remain robust.

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Besides steelmakers, Thursday’s Budget announcements also play well for cement makers, where industry executives said the announcements fit well with the capacity expansions planned.

“In qualitative terms, the Budget announcements are in a positive direction for cement demand and the industry is ready with its capacity expansion plans, envisaging India's future cement demand,” said HM Bangur, chairman for Shree Cement.

Domestic demand push may also help shield other building materials from export market volatility.

“Demand for other building materials, such as ceramics and pipes, will also see incremental gains owing to the extension of the Pradhan Mantri Awas Yojana (Grameen) to build over 20 million homes. This will propel demand for building materials such as secondary steel, ceramics, asbestos and PVC pipes. In particular, this will protect export-dependent sectors, such as ceramics from sluggishness in the international markets,” said Rahul Guha, director, CRISIL Ratings Ltd.

Executives from capital goods firms such as Siemens expect a trickle-down effect, including boost to private capex. “……this will have a cascading impact downstream, raising capacity utilisations further and triggering fresh investments by the private sector,” said Sunil Mathur, MD and CEO, Siemens Limited.

Tata Projects expressed a similar optimism. The company said the Budget allocation for capital goods and engineering companies could bolster order books, potentially leading to increased demand for their products and services.

Sanjay Sharma, chief financial officer (CFO), Tata Projects, further added, “The Budget announcements also establish a solid foundation for unprecedented development in the foreseeable five years.”

Base metals, such as copper and zinc, which are critical input materials in infrastructure steel and electrification, could also expect the demand story to remain positive.

“Infrastructure allocation is a game-changer for sectors such as metals, logistics, and green energy,” said Arun Misra, CEO at Hindustan Zinc.


Likely gains 

 Higher demand for steel makers including JSW Steel, Tata Steel and others
 

 Improved order inflow for capital goods and construction companies including L&T, Tata Projects
 

 Metro and Railway-focused engineering firms ABB, Siemens, KEC International and others to gain

 Rise in infrastructure and housing creation to improve demand for cement firms such as UltraTech Cement, ACC, Ambuja Cements
 

 Demand for base metals such as copper and zinc to increase on infra and green energy push

PLI outlay increased for semicon, MeitY, others

Finance Minister Nirmala Sitharaman, in her Interim Budget, increased the outlay for semiconductors and display manufacturing under the Modified Programme for Development of Semiconductors and Display Manufacturing Ecosystem, by four times. The Budget Estimate for the category in FY25 is expected to be Rs 6,903 crore, up from the revised estimate of Rs 1,503 crore in FY24.
 

Outlay for the PLI scheme under MeitY has also been increased to Rs 6,200 crore for FY25, up 36 per cent from the Revised Estimates of Rs 4,560 crore. Meity launched an IT hardware 2.0 PLI in 2023 for which the budget allocation was raised by Rs 50 crore to Rs 750 crore.

Total outlay under PLI schemes for pharmaceuticals, bulk drugs and medical devices is Rs 2,143 crore, up 26 per cent from Rs 1,696 crore in the Revised Estimates of 2023-24, and up 78 per cent from the Budget Estimate of 2023-24.
 

The outlay for automobiles and auto components went up over seven fold compared to Revised Estimate of Rs 3,500 crore in 2023-24, but reduced the outlay for the Faster Adoption and Manufacturing of Hybrid & Electric Vehicles (FAME) scheme by over 44 per cent compared to the Revised Estimates of 2023-24.