Morgan Stanley has estimated that growth in infrastructure investments will help fill up the gap in the space, with the help of the PM Gati Shakti National Master Plan.
Historically, India's manufacturing competitiveness has suffered due to poor infrastructure conditions. In recent years, the conditions have improved significantly, according to the brokerage.
The country's physical infrastructure compares favourably to China when it's seen in the context of the GDP differential. "We expect India's infrastructure investment to steadily increase from 5.3% of GDP in FY24 to 6.5% of GDP by FY29."
Holistic improvement in the country's infrastructure is also going to support macro stability by attracting FDIs and increasing exports, the brokerage said in a note on Tuesday.
This improvement can further rise on the back of PM Gati Shakti. The central holistic plan has delivered geospatial technology to provide real-time information on infrastructure projects.
PM Gati Shakti To Speed Up Project Execution
The PM Gati Shakti National Master Plan is expected to support faster execution of infrastructure projects, resulting in lower cost overruns, productivity gains, and high growth, according to Morgan Stanley.
However, the plan should achieve the following to ramp up India's infrastructure game:
Facilitating stronger coordination across ministries.
Improving capital allocation among competing infrastructure projects.
Tighter planning and decision-making.
Faster regulatory approvals.
Help in resolving issues during the project implementation phase.
Larsen & Toubro Ltd., NTPC Ltd., Titagarh Rail Systems Ltd. and UltraTech Cement Ltd. are the brokerage's top picks in the infrastructure space.
Morgan Stanley On Infrastructure
Expects a 15.3% CAGR in infrastructure investment, resulting in cumulative spending of up to $1.45 trillion in the next five years.
PM Gati Shakti to drive faster project execution in the infrastructure space, reducing cost overruns.
Major macro implications of higher infrastructure spending will be profit soaring via augmented capex, improved macro stability, greater efficiency, and more sustainable growth, the brokerage said in a note.
For the corporate sector, Morgan Stanley sees lower logistical costs and a lower working capital requirement.
In the case of the equity market, the effect will be indirect; however, the earning cycle will improve and the bull run will sustain itself.
Key risks include changes in government strategy, dependence on budgets, execution delays, potential supply-side challenges, a global recession, and weak growth.
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