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Investing in Nation-Building: The Republic Day Investment Guide

24 January 20246 mins read by Angel One
Invest in India's growth story as it celebrates its 75th Republic Day. Diversify your portfolios among booming sectors and adopt a long-term investment strategy for sustainable returns.
Investing in Nation-Building: The Republic Day Investment Guide
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India celebrates its 75th Republic Day on January 26, 2024, marking the 75th anniversary of our constitution’s establishment. Over the 75 years, we have made massive strides in various sectors. Consequently, India is one of the fastest-growing economies in the world, with a projected GDP growth rate of 6.2% in 2024. 

We have a large and diverse market, a young and skilled workforce, supportive policies and subsidies, and a favourable business environment. These factors make India an attractive destination for investors who want to tap into the opportunities of a developing nation.

However, investing in India also comes with challenges, such as political and social instability, infrastructure gaps, regulatory hurdles, currency fluctuations, and environmental issues. Therefore, investors must do their homework and research the sectors and industries crucial for the nation’s development and the associated risks and rewards.

Now, let’s look at some of the sectors and industries that are expected to drive India’s growth in the coming years are:

1. Electronic Systems

The Electronics System Design and Manufacturing (ESDM) industry is rapidly growing globally and is vital in transforming lives, businesses, and economies. In India, the sector is a key player in the journey towards achieving a $1 trillion digital economy by FY 2026, with the current electronics market valued at $155 billion and domestic production contributing 65%.

The adoption of 5G networks and IoT is fueling the demand for electronic products. Initiatives like ‘Digital India’ and ‘Smart City’ projects are boosting the electronics devices market, marking the beginning of a new era for electronic products.

  • Currently, India’s domestic production has grown at a Compound Annual Growth Rate (CAGR) of 13%, increasing from $49 billion in FY 2017 to $101 billion in FY 2023.
  • The country’s electronics export is projected to reach $120 billion by FY 2026.
  • From April to November 2023, electronic goods exports recorded a growth of 23.56%, reaching $17.74 billion compared to $14.36 billion during the same period in 2022.
  • India has climbed seven ranks in the Network Readiness Index 2023, now standing at 60, up from 67 in 2021.
  • Data costs in India have significantly reduced, dropping from ₹269 per GB in 2014 to ₹10.1 per GB in 2023, marking a 96% decrease.
  • The policy environment encourages foreign investment, with 100% Foreign Direct Investment (FDI) allowed under the automatic route. In defence electronics, FDI up to 49% is permitted through the automatic route, while beyond 49% requires government approval.

2. Infrastructure

India’s growth in 2023 and beyond hinges on key sectors, notably infrastructure, playing a vital role in propelling the nation toward a $26 trillion economy. The government’s commitment is evident through initiatives like the $1.3 trillion Gati Shakti master plan, fostering systemic reforms in infrastructure.

Infrastructure aids efficiency and cost-effectiveness. The government emphasises future-ready infrastructure to boost industries, enhance freight movement, and support manufacturing, fostering economic growth.

Initiatives like “Smart Cities Mission” and “Housing for All” benefit from these reforms. Additionally, Saudi Arabia plans significant investments, up to $100 billion, in energy, petrochemicals, infrastructure, agriculture, minerals, and mining in India.

To achieve the goal of a $5 trillion economy by 2025, India focuses on the National Infrastructure Pipeline (NIP), ‘Make in India,’ and production-linked incentives (PLI). While historically, over 80% of infrastructure spending targeted transportation, electricity, and water irrigation, the evolving environment prompts the government to diversify its focus.

  • The India Infrastructure Sector Market is expected to reach USD 204.06 billion in 2024 and grow at a CAGR of 9.57% to reach USD 322.27 billion by 2029.
  • With a 9% GDP contribution and employment for 51 million people, the infrastructure sector is critical. UN projections indicate India’s population will reach 1.64 billion by 2047, with 51% in urban centres. 
  • Policy support remains robust, with the 2023-24 budget extending a 50-year interest-free loan to state governments for infrastructure investment. The National Infrastructure Pipeline (NIP) boasts projects worth ₹108 trillion, and the National Investment and Infrastructure Fund (NIIF) established in November 2022, facilitates collaborative investments across sectors.
  • The 2023-24 budget underscores a 33% increase in the capital investment outlay for infrastructure to ₹10 lakh crore, fostering private investment. The construction sector attracts substantial foreign direct investment (FDI), and 100% FDI is permitted in completed projects for townships, malls, business constructions, and urban infrastructure.

3. Defence Manufacturing

The Indian government is focusing on the Defence and Aerospace sector as part of the ‘Aatmanirbhar Bharat’ initiative. In the Union Budget 2023-24, there’s a 6.7% increase in capital allocations for Defence modernisation, reaching ₹1,62,600 crore. The industry receives a total budget of ₹5.94 lakh crore, a 13% rise from the previous year

The Ministry of Defence aims for a turnover of ₹1.75 lakh crore in aerospace and defence manufacturing by 2025, with ₹35,000 crore from exports. As of April 2023, 606 Industrial Licences have been issued to 369 companies in the Defence sector.

To support domestic defence industries, the government is emphasising transparency, predictability, and ease of doing business. Steps include de-licensing, de-regulation, and liberalisation of foreign investments, with FDI increased to 74% through the Automatic Route and 100% by the Government Route. The Department of Military Affairs has introduced Positive Indigenisation Lists with 411 military items.

Dedicated Defence Industrial Corridors in Tamil Nadu and Uttar Pradesh are established to boost defence manufacturing. There are also government schemes like iDEX and DTIS to encourage innovation in the Defence & Aerospace ecosystem.

  • The Defence Budget for FY 2023-24 is 3.3% of the GDP, with defence exports reaching a record $160 billion in FY 2022-23. 
  • The current value of Defence production in FY 2022-23 is $1.068 Tr, reflecting a 13% increase in the Defence Budget for FY 2023-24 over the previous year.

4. Healthcare

The healthcare sector in India is rapidly growing, encompassing hospitals, medical devices, clinical trials, outsourcing, telemedicine, medical tourism, health insurance, and medical equipment. This growth is attributed to improved coverage, services, and increased investments from both public and private sectors.

The Ministry of Health and Family Welfare (MoHFW) is dedicated to expanding immunisation coverage, focusing on socio-cultural practices and beliefs among tribal communities. The Universal Immunisation Programme (UIP) is a major public health initiative, aiming to vaccinate around 2.67 crore newborns and 2.9 crore pregnant women annually against 12 vaccine-preventable diseases, reducing under-5 mortality.

Factors fueling the healthcare market include the surge in lifestyle diseases, demand for affordable healthcare, technological advancements, telemedicine adoption, increasing health insurance penetration, and government initiatives like e-health. The hospital sector’s revenue, valued at ₹7940.87 billion  in FY 2021, is projected to reach ₹18,348.78 billion  by FY 2027, growing at a CAGR of 18.24%.

Telemedicine presents significant growth potential, which is expected to reach $5.4 billion by 2025 with a CAGR of 31%. The National Digital Health Blueprint, over the next decade, could contribute an additional economic value of over $200 billion to the Indian healthcare industry.

Ayushman Bharat, the world’s largest health insurance scheme, is a government-supported initiative. India has invested ₹17,691.08 crorein 157 newly approved medical colleges since 2014, showcasing a comprehensive commitment to medical education. Notably, 100% foreign direct investment (FDI) is allowed for greenfield projects.

  • 189 million+ completed eSanjeevani telemedicine consultations 
  • 4,000+ health tech startups operating in India 
  • A workforce of 1.3 million allopathic doctors 
  • Additionally, there are 1,60,000 functional Ayushman Bharat centres

5. Renewable Energy

India is the world’s third-largest consumer of energy, and it stands fourth globally in Renewable Energy Installed Capacity, including wind and solar power. In 2022, India was ranked fourth in both Wind Power and Solar Power capacities.

At COP26, India pledged to achieve 500 GW of non-fossil fuel-based energy by 2030, marking the world’s largest expansion plan in renewable energy, a significant commitment under the Panchamrit initiative.

Over the last 8.5 years, India has seen a remarkable 396% increase in its installed non-fossil fuel capacity, reaching over 179.57 GW, constituting 42% of the country’s total capacity as of November 2023. In 2022, India recorded the highest year-on-year growth in renewable energy additions at 9.83%.

  • Specifically, solar energy capacity has surged by 30 times since 2014, now standing at an impressive 72.31 GW. The overall Renewable Energy capacity, including large hydro, has increased by around 128% since 2014.
  • Wind power capacity has also experienced substantial growth, doubling from 21 GW to 44.56 GW since 2014. Notably, India has already achieved its target of having 40% of its installed electric capacity from non-fossil fuels in November 2021.
  • In terms of global rankings, India holds the fourth position in total renewable power capacity additions. Additionally, the country ranks fourth in Wind Power Capacity and fifth in Solar Power Capacity globally.
  • India allows up to 100% Foreign Direct Investment (FDI) under the automatic route for renewable energy generation and distribution projects, adhering to the provisions of The Electricity Act 2003. 

Invest Now

These are some of the sectors and industries that are crucial for the nation’s development and offer attractive opportunities for investors. However, investors should also be aware of the risks and challenges associated with investing in India, such as market volatility, regulatory uncertainty, governance issues, and geopolitical tensions. Therefore, investors should diversify their portfolios across different asset classes, sectors, and geographies and adopt a long-term and disciplined approach to investing. So what you’re waiting for? Open your demat account with Angel One and invest in the top growth sectors of India today!

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