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Pace Of Road Construction In India Could Go Up 25% By Next Year

Pace of road construction is expected to go up to 32 to 34 km a day by the end of this year and 34 to 36 km a day in 2024-25, at which point, some 12,500-13,000 km of roads will be added annually.

By Govindraj Ethiraj
New Update
Road Construction
On today’s episode, financial journalist Govindraj Ethiraj talks to T Koshy, CEO of Open Network for Digital Commerce (ONDC) as well as ICICI Securities strategist Vinod Karki.

Our Top Reports For Today

  • <00:50> Pace of Road construction in India, could go up 25% by next year, says Crisil Ratings. 
  • <02:22> How Taxi & Auto Unions Are Driving Adoption of  ONDC by the thousands. 
  • <10:48> India’s traditional industries like iron and steel lead the pack in gross value add or GVA contribution to the economy.
  • <17:57> 32 Companies Apply to Make Laptops in India.


NOTE: This transcript contains only the host's monologue and does not include any interviews or discussions that might be within the podcast. Please refer to the episode audio if you wish to quote the people interviewed. Email [email protected] for any queries.

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Road construction is picking up

Rating agency Crisil is projecting a sharp or 25% increase in pace of road construction in the country in the next two years.

From around 21.6 km a day in the first quarter of the last financial year, the rate is now at 24.7 km / day. 

This is expected to go upto 32 to 34 km a day by the end of this year and 34 to 36 km a day in the year after that which is 2024-25. At which point, some 12,500-13,000 km of roads will be added annually.

Separately, Crisil is projecting a 33% increase in renewables power sector capacity addition from 30 GW to 40 GW in two years time.

All this is being driven by a major jump in spending on both roads and renewables.

The combined capital outlay1 on roads and renewables in the current and next fiscal is seen rising to Rs ~13 lakh crore, a whopping ~35% growth compared with the preceding two fiscals, backed by strong execution speed.

There are risks of course, including aggressive bidding and execution by new entrants, says Crisil. Roads or the construction of them as we know tend to attract newcomers. Though looked at differently, companies that came into the limelight for road contracts went on to build and own airports in previous decades. 

ONDC 

The Open Network for Digital Commerce was initiated by the Government but set up as a Section 8 company with investments mostly from banks public and private.

The ONDC hopes to democratise ecommerce and bring buyers and sellers together at much more reasonable costs, if not totally free as has been the case in some kinds of commerce, even if for a short while. 

ONDC defines it as a tech based initiative to transform the way ecommerce functions by enabling it through an open protocol based on open source specifications. At one level, the ONDC picks on the principle of public utility digital infrastructures like the UPI for transactions and Aadhaar for identity.

The ONDC now has over 150,000 merchants on it transacting via various apps in food, commerce and importantly mobility. Which is autos and taxis.

This is where it gets interesting, at this phase.

Some 90,000 of the 150,000 merchants are auto and taxi drivers in places like Kochi where it started, Bangalore and Mysore. Bangalore alone sees thousands of transactions a day.

More interestingly, the adoption of the mobility platforms has been driven by unions, in Kochi and Bangalore.

All of which I found out thanks to my guest T Koshy, CEO of ONDC who I reached out to ask first, where ONDC was today in its  journey and second, how or why mobility was taking off so fast ?

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MARKETS AND OTHERS

You could call it a dull day in the markets, which it would have been were it not for the fact that the markets have now risen for the third consecutively, even if only marginally. The BSE Sensex closed  at 65,087 levels on Wednesday, up only 11 points. The Nifty50,closed at 19,347, up 5 points.

Manufacturing Adds Value To India

India’s manufacturing sector growth will be driven by products linked to the capital expenditure cycle, which continues to rise, a new note from brokerage ICICI Securities has said. 

Moreover, while India’s highest gross value add contribution is in traditional industries like Iron and Steel and chemicals, the fastest growth in gross value added in the corporate manufacturing sector in the last decade was in communication devices (19% CAGR) the report says.

This runs somewhat counter to the perception that electronics manufacturing in India is lower on the manufacturing value add scale or at least not moving up.

The top 5 contributors to corporate manufacturing GVA in India are iron and steel around 11%, chemicals and chemical products around 10.5%, transport equipment at 10% and pharmaceuticals at 7.5%.

So traditional industries are still scoring, at least on this count. ICICI Securities has sourced these numbers from the National Account Statistics as well.

Iron and Steel includes companies like JSW, Tata Steel while chemical and chemical products would include HUL, Asian Paints, Pidilite and Godrej Consumer while Transport Equipment would include Maruti Suzuki, Tata Motors and Bajaj Auto among others.

Some industries like pharmaceuticals would obviously have higher gross value added or roughly gross profit compared to let's say iron and steel but this ranking tells you how the industries stack up and in the total pie of gross value added.

To understand more on the significance of the GVA number and the role of electronics manufacturing and communication devices looking ahead, I reached out to ICICI SEcurities strategist Vinod Karki and began by asking him to take us through the findings.

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While on the growth in Electronics manufacturing, the government has received 32 applications from companies such as Dell, Acer, Asus, Lenovo, Foxconn and Netware for the Rs 17,000 crore production-linked incentive (PLI) scheme for IT hardware, which includes laptops, tablets, and servers, the window for which closed last night.

Apple has not applied for this scheme at this point, going by reports.

"We are likely to see expected incremental production of Rs 3,35,000 crore. Expected investment incrementally will be Rs 2,430 crore. The expected direct employment is going to be 75,000," Union Minister Ashwini Vaishnaw.

“We had an outlay of Rs 17,000 crore for PLI 2.0 but got proposals of more than this number," he said.

The Government has also said beneficiaries should be required to use firmware, or software that comes embedded, for servers from Indian sources or other trusted foreign sources as certified by it. 

RICE AND WHEAT

In our now almost daily coverage of rice and wheat developments, NRIs in Singapore are clearly more privileged than NRIs in the US or UK or elsewhere.

India, which accounts for 40% of global rice trade, will now permit shipments to Singapore after banning export of non-Basmati rice last month.

India’s external affairs ministry Spokesperson Arindam Bagchi said: "India and Singapore enjoy a very close strategic partnership, characterised by shared interests, close economic ties and strong people to people connect. In view of this special relationship, India has decided to allow export of rice to meet the food security requirements of Singapore.

India had indicated that it would export on a country to country basis for food security needs. There are several countries in Africa, among other continents, who are reaching out to India to lift the ban to address their needs. 

The Government is moving quickly and sometimes perhaps too quickly to respond to rising food prices and food inflation. The Government on Monday reduced prices of LPG gas cylinders by Rs 200 ahead of a festival season and elections a little later.

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Meanwhile, exchange traded funds or ETFs have been the hottest product in town once upon a time not too long ago but are now closing down at a rapid clip, with many niche products in the industry struggling to attract investors in a market dominated by a handful of big technology stocks, the Wall Street Journal is reporting.

Exchange traded funds track an underlying asset which could either be exclusively stock, commodities, bonds, currencies, options, money market instruments or a combination of all.

ETFs can of course be equity ETFs, fixed-income ETFs, commodity ETFs, and currency ETFs.

A typical equity ETF could track the movement of an index like the Nifty 50 or the BSE S&P 500. There are over 174 ETFs in India as on June 30, 2023.  

Elsewhere, global fund closures have climbed to 929 in 2023 from 373 at the same point last year, according to the research firm ETFGI. New listings still exceed closures but have slowed 27% to 1,622. 

The closures reflect weaker inflows, waning enthusiasm for niche investment products and competition from big asset managers, which has consistently driven down fees, the WSJ says

One closure was of a metaverse equity ETF focused on the concept popularised by Mark Zuckerberg, a “Generation Z” ETF that promised to invest in companies aligned with the values of the younger generation. Another closure last week was of a cannabis-themed ETF whose shares had declined about 90% since its 2021 launch was liquidated, according to the WSJ.

 Some of the closures might also be encouraging to regulators who have sounded the alarm over the riskiness of leveraged single-stock ETFs and similar products.

Back home, things seem fine for now but a trend that might be interesting to watch and see how it develops.

AMAZON TO HOME

Among other international business news, Bloomberg is reporting Amazon.com Inc. Chief Executive Officer Andy Jassy telling employees who refuse to comply with his return-to-office mandate that “it’s probably not going to work out for you,” according to a recording of a company meeting obtained by Insider. 

Starting in May, Amazon began requiring corporate employees to be in the office three days a week

Morale at Amazon has taken a hit, says Bloomberg, since the company laid off about 27,000 employees. 

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That’s it from me for today. Have a great Thursday and see you tomorrow. Do write to us and do visit us on www.thecore.in where you will find this podcast and lots of exclusive reports and investigations.