Employment focus to drive capex push for engineering, infra firms: Execs

One of the election agendas was unemployment. You cannot do capex without generating employment. It is interlinked, says analyst

Helped largely by the central government’s capital-expenditure push of Rs 10 trillion and more than Rs 11 trillion in two successive Budgets, the country’s engineering and capital goods sector ended last financial year with orders of more than Rs 8.9 trillion.

The sector comprises L&T and 12 other companies in the same segment. This has grown by 17 per cent from Rs 7.67 trillion reported for March 2023.

L&T closed last financial year with orders of Rs 4.75 trillion.

With a coalition government now on the anvil, industry executives and analysts expect the trend to continue but the pace to differ.

“Decision making may see the impact of diverse thinking and diverse interests. The pace may differ from the last two terms because you have to take care of all the stakeholders, but the direction will continue,” said Anil Parab, wholetime director (heavy engineering and L&T Valves), Larsen & Toubro (L&T).

A top executive of another capital goods and engineering firm said: “Pick any indicator … the next two years look promising. Further, employment has emerged as an important focus, and the focus on infrastructure will remain. Directionally things should continue. We will need to wait for the Budget to understand sector-focus.”

Parab noted: “One of the election agendas was unemployment. You cannot do capex without generating employment. They are interlinked.”

Analysts with IIFL in a report on the capital goods sector noted: “While a broad investment thrust on infra and manufacturing should continue, large outlays driven by major reforms in the power distribution sector may be at risk or witness delays.”

Brokerage firm Nuvama had a similar view: “The new coalition may be less decisive than the outgoing one, and the spending push could shift towards rural (versus capex earlier) in the near term. However, we do not see the new government backtracking on reforms or resorting to fiscal profligacy.”