DSP Mutual Fund expects manufacturing sector to register substantial growth over the next decade with its contribution to GDP to increase three-fold to $1.66 trillion by FY34 against $459 billion logged last fiscal .

The manufacturing sector’s contribution to the GDP is expected to rise to 21 per cent by FY34 against 14 per cent in FY24. Moreover, the sector will be bolstered by lower logistics costs and improved infrastructure.

Investments in infrastructure are set to climb to 36 per cent of GDP by FY29 against 33 per cent in FY24 sparking a ripple effect on the economy.

Capex push

The private capex will start trickling in with the industry capacity utilisation touching 75 per cent. With the uptick in demand, top steel, cement and other metal companies have already announced huge capex.

DSP projects that the Production Linked Incentive scheme has the potential to facilitate capex of $39 billion between FY24 and FY26. While investment in certain industries will be boosted by PLI, sectors such as power, defense, water and manufacturing are primarily fuelled by demand rather than a push, it said.

However, the fund house wants investors to venture into this sector through SIP rather than lump-sum investment.

Charanjit Singh, Fund Manager, DSP Mutual Fund, said the country’s manufacturing as a percentage of GDP is struggling at 14 per cent while it was much higher at over 20 per cent in other Asian countries,.

Private sector capex backed stable government policies and healthy balance sheet will drive the growth in coming days, he added.

The fund house’s actively managed DSP India TIGER Fund, which has asset of ₹4,386 crore, has delivered 42 per cent CAGR over 5 years through the SIP route. However, return from lump-sum investment has nearly halved to 28 per cent in the same period. Incidentally, the fund has completed 20 years and invests in key themes including energy transition, rise of domestic manufacturing, disruption in supply chains, housing, water, railways and defence.

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