India's economic recovery continues even as the third, or omicron, wave of Covid-19 is showing signs of abating. Improving mobility is shoring up hopes that the current fiscal will end with a pick-up in demand and a broader recovery.
As we step into the next fiscal, the risks are shifting - from pandemic-driven to geopolitical and the actions of systemically important central banks. The sustainability of growth next year will be shaped by the interplay of such risks and the government's execution of its capex goals.
The buoyancy in revenue growth this fiscal should extend into the next, especially in the consumption segments hit by supply-chain disruptions, and a services sector that hasn't yet recovered amid the travel restrictions.
The upshot:
India Inc is set for double-digit revenue growth once again next fiscal, driven by both, volume and prices - and despite the high base of ~20% growth likely this fiscal. Most segments in volume terms may finally reach pre covid sales
Profitability will come under pressure with rising input and wage costs
Any capex rebound - despite headroom in capacity utilisation - will be driven by large companies with deleveraged balance sheets, backward-integration to reduce dependence on imports, and tapping the opportunity stemming from the diversification strategy of global vendors. The Production Linked Incentive schemes will help a lot, too.
Another thing that the pandemic has wrought is heightened awareness of climate change, and the net-zero commitments of large polluters at COP26. India, touted as the third-largest polluter globally with CO2 emissions of ~3 billion tonne in 2021, plans to turn net-zero by 2070.
The transition will be done in phases with the first one focusing on investing heavily in established technologies, while exploring new ones.
This will mean increased green investments until 2030, which will help India move closer to its ambitions of reaching 500 GW of non-fossil fuel capacity addition, and higher share of renewable energy in the power mix, among others.
While hindrances will be many, the key would be to assess the opportunities emerging.
CRISIL will discuss its views on all this and more, including the recovery curve and the impact of sustained higher input costs - amid an incipient investment recovery - at the India Outlook event scheduled for March 10.
Key discussion points:
What will be the drivers of recovery next fiscal?
How will consumption recovery pan out at the bottom of the pyramid?
Will input costs remain high and what that means for India Inc's profitability?
What do PLI, COP26 and the government's infra push mean for private capex recovery?
What will be India's green investment spend under CRISIL's sustainable scenario until 2030?
Who will spend the most and who will fund the green dreams?
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