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Investec Capital: Manufacturing is the next engine of growth with import substitution in play in pharma

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Investec believes that manufacturing is going to be the next engine of growth, said Mukul Kochhar, Co-Head Equities at the investment firm on Thursday. He also said that this whole import substitution theme in specialty chemicals and pharmaceuticals is only going to get stronger from the next few years.

Investec believes that manufacturing is going to be the next engine of growth, said Mukul Kochhar, Co-Head Equities at the investment firm on Thursday. He also said that this whole import substitution theme in specialty chemicals and pharmaceuticals is only going to get stronger in the next few years.
“On manufacturing we have been stagnant as a percentage of GDP for the last 55 years, it has been in the range of 15-16 percent of GDP. However, things seem to be changing and you can see the numbers, if you look at net chemical exports from India excluding fertilisers India was a net importer of chemicals up till two years back, this year India turned into a net exporter of chemicals to the extent of USD 10 billion,” Kochhar told CNBC-TV18.
The PLI scheme in electronics is encouraging domestic mobile manufacturing in the country, he said.
“Similar trends are actually playing out in electronic manufacturing, you have seen the excitement around mobile manufacturing in India, the PLI scheme is encouraging domestic manufacturers too also set up capacity. If we just look at these two sectors incremental impact on GDP is already as high as 0.5 to1 percent of GDP.”
On investing in manufacturing, Kochhar said, “Some of the largest chemical companies in India like Aarti Industries, Deepak Nitrite their sales are still just around Rs 4,000 crore so runway to growth is pretty substantial in this sector and this sector is actually very good for stock selection.”
“Similarly electronic manufacturing in India offers a few good companies to invest in, once again growing of a very small base with a very long runway for growth.”
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