Manufacturing dominated new projects in Q1, share at 10-quarter high

More than half of all new project announcements in the June 2025 quarter came from the manufacturing sector. Manufacturing projects worth around ₹2.3 trillion were announced in the three-month period, accounting for 54 per cent of total new projects, according to data from the Centre for Monitoring Indian Economy (CMIE). This is the highest share in 10 quarters. Such a high share has occurred less than six times since 2010. 

The government has been driving much of the capital expenditure (capex) in recent years through its announced investments in roads, railways, and other infrastructure projects. The value and share of manufacturing projects assumes significance because of the sector’s potential for job creation and what it might mean for private capex, seen to be a major driver of economic growth.

Many of the announcements in previous quarters have been in the nature of agreements at state-organised investment summits, and companies may not be obligated to follow through. 

India needs to create nearly 7.9 million new non-farm jobs annually until 2030 to meet the demands of its growing workforce, according to the 2023-24 Economic Survey. Manufacturing is expected to play a crucial role in meeting this demand. 

Capex for manufacturing has been rising and had come in at ₹60,000 crore in June 2024. Numbers can vary widely in a given quarter but there is a rising trend. India has seen traction beyond basic industries to segments, including light engineering and speciality chemicals; among others, suggested independent market expert Ambareesh Baliga. 

China’s withdrawal from certain sectors, besides the increasing clamour among global companies to derisk manufacturing from China alone, has played been a positive for Indian manufacturing, said Baliga. Domestic companies have seen an uptick in productive capacities being put to use, which can also nudge companies to consider additional investments. Manufacturing capex should continue to be resilient, according to Baliga. 

“That should continue because we’ve seen a decently long drought,” he said. 

The Reserve Bank of India’s Order Books, Inventories and Capacity Utilisation Survey (OBICUS) showed capacity utilisation rising to 75.4 per cent in the December 2024 quarter, up from 74.2 per cent in the preceding quarter. The data is released with a lag. 

Two sectors dominated the majority of new capex announcements in June. Metals and metal products accounted for 34.3 per cent of the total value of announcements. This was followed by chemicals (8.3 per cent) and machinery (3.5 per cent). 

The major manufacturing projects include Vedanta’s Dhenkanal Aluminium Smelter Project worth an estimated ₹1.2 trillion, according to a CMIE note. This includes a smelter and captive power plant. Deepak Nitrite announced a ₹3,500 crore manufacturing complex for the manufacture of phenol and acetone, isopropyl alcohol and related infrastructure and utilities, according to an exchange announcement. 

“Beyond metals and chemicals, sectors such as pharmaceuticals, defense, electronics, and auto components are poised for significant investment. These are sectors that have been recognised globally for India's focus on cost as well as quality,” said Prenayan Kaul, partner, PwC India, in an emailed response.