Momentum in investment demand is being driven by infrastructure related sectors says RBI's semi-annual survey

The Reserve Bank has recently come up with an update on semi-annual survey of representatives from industry associations, including several industry bodies, credit rating agencies and banks. It noted that consumption of non-durable goods showed buoyancy as growth in rural consumption outpaced urban consumption, particularly in the non-food category. Consumer durables registered double digit volume growth, with spending in small towns on premium/ feature-rich segments recording a rise. The upcoming festival season is expected to boost demand for consumer products.

The momentum in investment demand is being driven by infrastructure related sectors and certain manufacturing segments, i.e., chemicals, electronics, semiconductors, automobiles, and green energy. With the manufacturing sector's capacity utilisation ranging between 70 to 80 per cent across industries, a majority of survey respondents expect an improvement in private investment in H2:2024-25. Investment has gained traction from the Production Linked Incentive (PLI) scheme and this is expected to extend further in the coming months.

Global Capability Centers (GCCs) and hospitality are expected to attract more private investment in the services sector. The medium-term capital expenditure outlook (2024-2028) remains positive, partly backed by the government's infrastructure push and substantial investment intentions across critical sectors. Rising demand for emerging technologies, i.e., artificial intelligence (AI); cloud transformation, data analytics; and internet of things (IoT) is expected to drive growth in the information technology segment, with more hiring and better margins.

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