From 10 GW data centres to $45-billion space economy: Jefferies maps India’s next industrial growth…

New business data points to the fact that India’s next phase of industrial expansion could be fuelled by six emerging sectors — space, semiconductors, data centres, electronics, solar manufacturing and aerospace, according to Jefferies. These six key expansion engines could attract substantial investment over the rest of the decade, as policy backing and a large domestic market draw greater private sector interest, the brokerage stated in a recent note.

In its India Equity Strategy report titled India’s New Industrial Revolution, Jefferies stated government's incentive schemes, localisation requirements, tax benefits and the opening of previously restricted sectors are helping create opportunities across these industries. Government measures such as opening the space sector to private firms, semiconductor incentives, localisation requirements, and backing for solar and electronics manufacturing are driving greater private sector participation in emerging industries.

Among the biggest opportunities is data centres. India’s colocation data-centre capacity has expanded fivefold during the past five years to around 2 GW, and Jefferies anticipates another fivefold gain to around 10 GW over the next five years. The brokerage estimates the expansion could require around $45 billion in facility capital expenditure and create a roughly $9-billion topline opportunity for data-centre operators. The investment could additionally benefit construction firms, real-estate developers, power-equipment suppliers, cooling-solution providers and network-infrastructure firms.

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In the meantime, India’s space economy is targeted to expand around fivefold from 2023 marks to $40-45 billion by 2030. Jefferies stated private firms are progressing from early-stage innovation towards commercial execution after the sector was opened to private participation in 2020. It highlighted players such as Skyroot Aerospace, Pixxel, Agnikul Cosmos and Digantara.

India's semiconductor ambitions are moving from policy intent towards execution, with around $20 billion of investments already underway. These include a chip fabrication plant under construction as well as several outsourced semiconductor assembly and test (OSAT) projects moving into production. A new incentive plan of around $13 billion could further expand the ecosystem, although Jefferies flagged supply-chain depth, talent and global competitive pressure as challenges.

The electronics industry is additionally moving from assembly towards greater domestic component manufacturing. Jefferies anticipates local value addition to climb to around 50 percent of the mobile component bill of materials over the next six years from less than 20 percent at present. Printed circuit boards represent another opportunity, with an estimated $5-billion market still largely dependent on imports.

In solar manufacturing, India has emerged as the world’s second-largest solar PV manufacturer, with around 35 GW of solar-cell capacity operational and another roughly 100 GW under construction. Jefferies anticipates around 90 percent of the solar manufacturing value chain to be localised by 2030, aided by production incentives and domestic-content requirements.

Aerospace rounds out the six themes. Boeing and Airbus already source around $1.4-1.6 billion annually from India, and Jefferies sees scope for Indian manufacturers to gain from global supply-chain constraints. Firms including Aequs, Azad Engineering, Bharat Forge, Dynamatic Technologies, Motherson and Sansera have emerged as suppliers to global aerospace manufacturers and Tier-1 firms.