Thread by @ithoughtadviser

Infrastructure as a Theme

A Thread!

#stockmarket #investing #infrastructure #infrastocks

1/19

To understand the infrastructure cycle, we go back in time and look at our previous super Capex cycle, which started from 2003 to 2012

#capex #Markets

2/19

We saw that the commodity prices were increasing, reforms such as the Electricity Act came into play and government spending grew at a rapid pace of 23% CAGR. This led to overall growth in the capital cycle

#commodity #economy

3/19

2006 to 2008, private sector companies entered the party. We saw huge participation by the power, steel, and cement companies. Commodity prices were still on an up move which triggered a Capex cycle globally

#Capex #GlobalMarkets

4/19

GFC struck. 2009 onwards, we saw that across segments demand had started to slow down. There was excess capacity and a lot of leverage across players

#financialcrisis

5/19

Excessive capacity and lower commodity prices meant a long period of balance sheet repair

#commodity

6/19

In a nutshell

#capex #india

7/19

2013-2019 was a period that also witnessed a consumption-driven growth where high household leverage led to high consumption growth despite low job creation in the country. This raised a very important question. Can consumption alone drive GDP growth?

#GDP #Economy #india

8/19

Without investment picking up and creating jobs, consumption is unlikely to sustain beyond a point. This was seen in 2019 when GDP had bottomed out at 4%

#investing #GDP

9/19

Capex spending dried up in India as the global economy recovered from the 2008-09 global crisis. To drive private investments, Prime Minister Narendra Modi’s government cut corporate taxes to among the lowest in Asia in 2019 as growth slowed. But then the pandemic struck

10/19

If you look at investment’s contribution to GDP, it had reached almost 27% in FY21 from peaks of around 36% in FY07, which is at a very low level.
Source: DSP Investment Managers

#investment #GDP

11/19

With investment’s contribution to GDP growing at -2.7%, between FY19-FY21, it became clear that the investment cycle had bottomed out and there was a need for the government to spend on capacity creation.

#GDP

12/19

We covered what actually drives capacity creation in our podcast on infrastructure with Charanjit Singh- Fund Manager, DSP Tiger Fund

#infrastructure #podcast

13/19

open.spotify.com/episode/57yPPj…

Enter - Union Budget 2022-23

#Budget #Budget2022

14/19

“Public investment must continue to take the lead and pump prime private investment and demand in 2022-23.” - Finance Minister. The government announced an ambitious plan to spend 7.5Lk cr, up 35% from the previous year.

#investments

15/19

Capex is concentrated in 8 ministries and departments, with road transport and highways accounting for 24% of the total capex, Defence 20%, Railways 18%, transfer to states 18%, telecommunications 7%, housing and urban affairs 3%, atomic energy accounting 2% and police 2%

16/19

The budget clearly signalled a thrust on infrastructure. The government will lead from the front. What matters is that private investments should follow.

#india #budget #infrastructure

17/19

We are at the cusp of witnessing an overall investment boom in India for the next few years

#investment #investors #wealthcreation

18/19

The government has clearly understood its role. An investment boom is not an option, it is necessary for us to achieve higher growth. The budget has set the market up for an interesting and exciting reset

#investment #budget

19/19