The Indian solar industry is poised for a massive boost, with the Production-Linked Incentive (PLI) scheme expected to attract upwards of Rs 3-4 lakh crore in investments over the next few years
According to a top ICRA executive, the PLI scheme is anticipated to draw investments of Rs 3–4 lakh crore over the course of the next four years and create 2 lakh jobs as major projects in industries like solar modules, semiconductors, and pharmaceutical intermediaries are anticipated to take off.
Going forward, private sector capital expenditure is anticipated to increase in the cement, oil and gas, metals and mining, hospitals, and healthcare sectors, according to K Ravichandran, Executive Vice President and Chief Ratings Officer at ICRA.
To raise private sector capital expenditure to historically high levels, however, would necessitate tax breaks from the government, giving people more disposable income.
"We anticipate additional investments under the PLI scheme of Rs 3-4 lakh crore over the next 3-4 years." In the future, significant projects that may require a significant investment of capital and personnel are anticipated in the semiconductor, solar module, and pharmaceutical industries, among other sectors. They would be producing two lakh jobs across various industries, Ravichandran said in an interview with PTI.
With a budget of Rs 1.97 lakh crore, the PLI scheme was introduced in 2021 for 14 industries, including telecommunication, white goods, textiles, medical device manufacturing, cars, speciality steel, food products, high-efficiency solar PV modules, advanced chemistry cell batteries, drones, and pharmaceuticals.
Up until November 2023, PLI schemes had received over Rs 1.03 lakh crore in investments, creating over 6.78 lakh jobs.
According to Ravichandran, there will likely be a rise in private capital expenditure in the oil and gas, metals and mining, cement, hospitals, and healthcare sectors. These are the industries anticipating significant expenditures in the medium run. But in contrast to previous years, this time around, the capital expenditures are primarily focused on renewable energy, electric vehicles, and green energy.
We must take action on the demand front if we are to reach a high level of capital expenditure. In rural areas and at the lower end of the market, consumption is modest. We need to increase demand through tax incentives or other ways, he stated.
For a while now, capacity utilisation across a range of industries has been roughly 75 percent, so increasing demand will be necessary to advance private capital expenditures to the next level.
According to Ravichandran, it is improbable that the government will alter the public sector capital expenditure budget for the current fiscal year, which is Rs 11.11 lakh crore.
"Spending on infrastructure will not increase from where it is now, in my opinion. The government intends to follow the path of fiscal consolidation. It will be challenging to increase the budgetary expenditure for infrastructure given the requirement to lower the debt level. Thus, the financial burden will fall on the private sector," he stated.
From Rs 4.39 lakh crore in the 2020–21 fiscal year to Rs 11 lakh crore in the 2024–25 fiscal year, the government's capital expenditure allocation more than doubled.
The budget's capex allocation has increased in monetary terms, but in percentage terms, the increase has slowed down to 11 percent in 2024–25 from approximately 35 percent in the three previous financial years.