Leading the charge towards bolstering India’s economic immunity in 2021 will be infrastructure sub-sectors of Indian manufacturing. India’s infrastructure verticals have identified a requirement of INR 50 lakh crore worth of investment.
2021 marks a paradigm shift in India towards the creation of Infrastructure which acts as an economic and jobs multiplier. The four megatrends in terms of Government initiatives seem to bode well for EPC companies. These are the INR 100 lakh crore National Infrastructure Pipeline, the INR 100,000 crore MGNREGA outlay, structural reforms in 8 sub-sectors, and health infrastructure. These eight sub-sectors are coal, minerals, defense production, airspace management, MRO, and power distribution.
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The multiplier effect of investments in the infrastructure space will drive up the demand for direct and indirect materials. 2021 will also see the rise of agile procurement in the infrastructure sector. Companies in the infrastructure sector in India have traditionally faced high project overrun costs to the tune of INR 4 lakh crores, which is 44% higher than their planned project costs. With infrastructure spending being a defining theme of India’s supply chain overhaul, the demand for agile procurement of industrial supplies from EPC companies will be higher than ever before.
Furthermore, EPC companies are also likely to switch away from their previous obsession with the JIT model and move towards a more de-risked model. EPC companies are more likely to maintain higher buffer stocks of MRO in 2021 to ward off the risks of supplier disruptions.
While 2021 is likely to see India’s infrastructure engines roaring back to growth, taking advantage of an expansionary fiscal policy. As a result, investments are likely to see headwinds for EPC companies.
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Abheet Dwivedi is Director, Infrastructure at Moglix.
To learn more about manufacturing and supply chain trends in 2021, download our ebook titled Road to Self-Reliant Manufacturing: Procurement and Supply Chain Insights for 2021 here.
