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  • CV makers can be a good proxy to play on govt infra focus
  • January 22,2018
  • blog(By D K Aggarwal, Chairman and MD, SMC Investments and Advisors Ltd.) As India gears up for the presentation of Union Budget on February 1, 2018, hopes are running high that the government will dole out sops in the budget, giving a further fillip to the infrastructure sector.

    The focus of the government on infrastructure spending is expected to further revive the capex cycle, as we may see higher allocations for roads, railways, and power programmes. It is also expected that urban infrastructure, housing, water and sanitation needs would see a ot of government''s attention.

    Also, corporate loan growth could make a comeback from such sectors as power transmission, manufacturing, engineering and other technical segments.

    India is far behind in terms of infrastructure, and as the commercial vehicles segment is directly connected with economic and commercial activities, with growing focus on it, the segment is expected to see massive growth going forward.

    The commercial vehicle industry is expected to see further momentum aided by increased thrust on infrastructure and rural sectors in the upcoming Budget and on resumption of mining activities in selected states.

    To note, Coal IndiaBSE 0.14 % has identified mines with production capacity of 908 million tonnes so far. It could be seen that the core sector data has also improved reasonably led by strong growth in the sectors of coal and electricity.

    Undoubtedly, India is well-endowed in terms of most minerals and the country''s mining sector has great potential. The reformative Goods and Services Tax (GST) has been a harbinger of change for the transport and logistics industry and this too is going to support the commercial vehicle segment.

    Additionally, the National Green Tribunal''s (NGT) decision to phase out old diesel vehicles along with government''s proposed vehicle modernization programme will further support the sector by boosting the replacement demand.

    As per Crisil BSE 0.41 %, the overall commercial vehicle industry is expected to grow by around 10 per cent in fiscal 2019. While focus continues on penetrating in domestic market, Indian manufacturers are also looking to gain a foothold in the global market.

    With the revival in the global economy, expansion in the new markets like Asia, Africa and the West Asia by the Indian conglomerates, scaling up exports from foreign CV OEMs and growing demands from existing markets like the SAARC region, the sector is expected to see good growth.

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