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Global economic overview

Elevated inflationary pressures, the persistent escalation of interest rates by central banks in response to inflationary concerns, ongoing geopolitical crises in Europe and other regions and recessionary trends in multiple countries have intermittently disrupted supply chains and affected global economic activity in the first half of the financial year.

The global economy was on track for a gradual recovery from the severe impacts of both the pandemic and the Russia-Ukraine war in the second half of the fiscal year. The global economic output is anticipated to experience consistent growth, primarily driven by a resurgence in consumer sentiment and restored investor confidence.

Inflationary pressures across countries are waning. The World Banks Commodity Outlook, April 2023, sees prices of international commodities, barring precious metals, easing in the current year following improving supply chains.

Emerging and developing nations are experiencing growth across various sectors, driven by their respective governments focus on enhancing infrastructure and fostering the manufacturing industries. China, too, is currently recovering from the adverse effects of the pandemic on its economy.

Moreover, global inflation is expected to decline from 8.7% in 2022 to 6.8% in 2023 and further to 5.2% in 2024. According to the International Monetary Funds World Economic Outlook (July 2023), the global economy is projected to grow at a rate of 3.0% in CY23.¹

Outlook

Despite facing inflationary pressures, the global economy is sustained by a strong labour market, augmented domestic expenditures, an influx of foreign investments, and a cautious approach to addressing energy crisis in Europe.

The alleviation of supply chain disruptions could assist in moderating inflation and reduce the necessity for additional monetary tightening measures. The overall positive global outlook will depend on the swiftness and effectiveness of fiscal and monetary policy measures employed to stimulate economic expansion.

Indian economic overview

India demonstrated remarkable economic resilience despite facing challenging global economic conditions. Although India grappled with high inflation, the RBIs prudent monetary policy helped bring down the inflation trajectory to a tolerance level during the latter half of the fiscal year. In addition, the governments growing focus on infrastructure creation, employment generation, incentivisation of the manufacturing sector and easy flow of credit to all sectors helped the economy register a resilient performance (7.2%). Indias growing stature on the global stage (G20 Presidency) also helped bolster the confidence of international investors towards Indias economy.

The growth can be attributed, as per the sectoral analysis, to an upward trajectory in construction activity, which has been facilitated by significant infrastructure investments from both the Central and state governments. This strategic allocation of funds is also leading to substantial employment opportunities on a significant scale.

Throughout the financial year 2023, there was a consistent rise in GST collections, electronic toll collections, and the generation of E-Way bills, indicating a promising momentum. Moreover, indicators related to the services sector, such as UPI transactions and high credit demand, suggest potential prospects for long-term expansion.

Outlook

While the revival of private investment following the pandemic is in its early stages, there are early indicators suggesting that India is moving towards a more substantial investment up-cycle in both the manufacturing and services sectors.

Indias demand conditions remain conducive to sustained economic growth, and the country maintains an optimistic outlook for the upcoming fiscal year, underpinned by a foundation of macroeconomic stability. However, there is a prudent recognition of emerging geopolitical and geo- economic challenges that require careful consideration.

Industry overview

Automobile industry

The automobile industry in India is a vital component of the countrys economy. It serves a critical role in fuelling economic progress by demonstrating strong backward and forward linkages. The implementation of liberalisation measures and purposeful policy interventions in recent years have fostered a thriving and fiercely competitive market, attracting numerous fresh entrants. As a consequence, the industry has witnessed substantial capacity expansion, leading to substantial employment generation.

The automotive industrys contribution to the National GDP has experienced a significant increase, reaching approximately 71%. This sector serves as a crucial source of direct and indirect employment for over 19 million individuals.

From April 2022 to March 2023, the automotive industry in India recorded a total production of 2,59,31,867 vehicles, encompassing passenger vehicles, commercial vehicles, three-wheelers, two-wheelers, and quadricycles, compared to 2,30,40,066 units produced during the period of April 2021 to March 2022.

Automobile production in India (in Units)

Category	2017-18	2018-19	2019-20	2020-21	2021-22	2022-23
Passenger vehicles	4,020267	40,28,471	34,24,564	30,62,280	36,50,698	45,78,639
Commercial vehicles	8,95,448	11,12,405	7,56,725	6,24,939	8,05,527	10,35,626
Three wheelers	10,22,181	12,68,833	11,32,982	6,14,613	7,58,669	8,55,696
Two wheelers	2,31,54,838	2,44,99,777	2,10,32,927	1,83,49,941	1,78,21,111	1,94,59,009
Quadricycles	1,713	5,388	6,095	3,836	4,061	2,897
Grand Total	2,90,94,447	3,09,14,874	2,63,53,293	2,26,55,609	2,30,40,066	2,59,31,867

(Source- Society of Indian Automobile Manufacturers)

Total passenger car sales increased significantly in FY 2022-2023, going from 30,69,523 to 38,90,114 units. Specifically, sales of passenger cars, utility vehicles, and vans also experienced growth, with numbers going up from 14,67,039 to 17,47,376 units, 14,89,219 to 20,03,718 units, and 1,13,265 to 1,39,020 units, respectively, as compared to FY 2021-22.

Similarly, the overall commercial vehicles sales showed a significant rise, increasing from 7,16,566 to 9,62,468 units. This growth was further demonstrated in the sales of Medium and Heavy Commercial Vehicles, which increased from 2,40,577 to 3,59,003 units, and Light Commercial Vehicles, which increased from 4,75,989 to 6,03,465 units, during FY2022-23, compared to FY2021-22.

Moreover, three-wheeler sales experienced a substantial increase, rising from 2,61,385 to 4,88,768 units in FY-2022-23, compared to the previous year. Additionally, two-wheeler sales also witnessed a significant surge, increasing from 1,35,70,008 to 1,58,62,087 units in FY-2022-23, compared to FY2021-22.

Automobile exports (in Units)

Category	2017-18	2018-19	2019-20	2020-21	2021-22	2022-23
Passenger vehicles	32,88,581	33,77,389	27,73,519	27,11,457	30,69,523	38,90,114
Commercial vehicles	8,56,916	10,07,311	7,17,593	5,68,559	7,16,566	9,62,468
Three wheelers	6,35,698	7,01,005	6,37,065	2,19,446	2,61,385	4,88,768
Two wheelers	2,02,00,017	2,11,79,847	1,74,16,432	1,51,20,783	1,35,70,008	1,58,62,087
Quadricycles	0	627	942	-12	124	725
Grand Total	2,49,81,312	2,62,66,179	2,15,45,551	1,86,20,233	1,76,17,606	2,12,04,162

(Source- Society of Indian Automobile Manufacturers)

During the period from April 2022 to March 2023, there was an increase in passenger vehicle exports, rising from 5,77,875 units to 6,62,891 units. However, commercial vehicle exports declined from 92,297 units to 78,645 units, three-wheeler exports decreased from 4,99,730 units to 3,65,549 units, and two-wheeler exports decreased from 44,43,131 units to 36,52,122 units, in FY 2022-23.^{2 3}

Automobile sales (in units)

Category	2017-18	2018-19	2019-20	2020-21	2021-22	2022-23
Passenger vehicles	7,48366	6,76,192	6,62,118	4,04,397	5,77,875	6,62,891
Commercial vehicles	96,865	99,933	60,379	50,334	92,297	78,645
Three wheelers	3,81,002	5,67,683	5,01,651	3,93,001	4,99,730	3,65,549
Two wheelers	28,15,003	32,80,841	35,19,405	32,82,786	44,43,131	36,52,122
Quadricycles	1,605	4,400	5,185	3,529	4,326	2,280
Grand Total	40,42,841	46,29,049	47,48,738	41,34,047	56,17,359	47,61,487

(Source- Society of Indian Automobile Manufacturers)

 ²https://static.pib.gov.in/WriteReadData/specificdocs/documents/2023/feb/doc2023217160601.pdf

 ³https://www.siam.in/statistics.aspx?mpgid=8&pgidtrail=9

Outlook

Over the past two decades, Indias automotive sector has achieved remarkable growth, attracting global interest and establishing itself as a potential contender for a prominent position in the global market. It currently holds the second- largest position in two-wheelers, the seventh-largest in commercial vehicles, the sixth-largest in passenger vehicles, and stands as the largest manufacturer of tractors. In the past decade, India has emerged as a highly favoured destination for manufacturing superior automotive components and various types of vehicles, effectively closing the gap with several well-established locations in the industry.

Over the forthcoming decade, the global automotive industry is expected to undergo substantial changes. These transitions include a shift in automotive demand from developed to emerging countries, notably the BRICS countries. Additionally, it is expected that there will be a remarkable increase in the incorporation of electronics in vehicles, transforming them into computers on wheels connected to the Internet. Moreover, manufacturers will be actively seeking economies of scale and scope in the design and engineering of automobiles and components, while also exploring cost-effective manufacturing locations ⁴

Indian Railways

India has the worlds fourth largest railway network, after only the United States, Russia, and China. The Indian Railways network spans a total track length of 126,366 km and includes 7,335 stations. In FY23, a significant track length of 5,243 km was achieved, surpassing the previous years achievement of 2,909 km. Notably, the average daily track laying reached a record high of 14.4 km per day. The railways daily operations encompass 13,523 passenger trains and 9,146 freight trains.⁵

During FY23, the Indian Railways achieved significant milestones, including loading 1,512 MT of goods, a 6.63% increase from the previous year, and generating revenue of H 2.44 lakh crores, reflecting a notable growth of 2775%. These accomplishments were ascribed to a customer- centric strategy, enhanced service delivery, and effective policymaking, which drew additional traffic from both traditional and non-traditional commodity streams. The railways sustained efforts and business development initiatives contributed to this landmark success.

The Indian Railways is making significant strides towards achieving its Mission 100% Electrification and aims to become the worlds largest green railway network. During the fiscal year (FY23), it accomplished electrification of 6,542 Route Kilometers (RKMs), surpassing the previous highest electrification of 6,366 RKMs achieved in 2021-22, representing a notable increase of 2.76%.

In an effort to enhance line capacity and accommodate more trains on existing High Density Routes, the Indian Railways has adopted Automatic Block Signalling as a cost-effective solution. During FY23, it has successfully upgraded 530 kilometres with automatic signalling, reflecting a remarkable increase of 143.12% compared to the 218 kilometres achieved in FY22. This achievement marks the highest-ever figures recorded for automatic signalling in the history of Indian Railways.

A significant number of Digitally Interlocked Stations have been established by Indian Railways, transitioning from old lever frames to computer-based operating systems. The adoption of electronic interlocking on a large scale is aimed at leveraging digital technologies in train operations and enhancing safety. In FY23, a total of 538 stations were equipped with Electronic Interlocking, marking a notable increase of 27.79% compared to the 421 stations in the previous year (2021-22).⁶

Major developments

• During FY23, efforts were made to enhance public safety and convenience by constructing 1,065 Flyovers/ Underpasses, as compared to 994 Flyovers/Underpasses built during the previous year, demonstrating a growth of 7.14%. These measures aimed to facilitate the public in safely crossing the railway tracks on roads.

• A total of 375 foot overbridges (FOBs) were constructed for passenger and pedestrian crossings in FY23, indicating a marginal increase from the 373 FOBs built in the previous year. These constructions were implemented to enhance safety and convenience for commuters and pedestrians.

• Ensuring safety at level crossing gates has been a significant area of focus. In FY23, a total of 880 level crossing gates were eliminated, representing a slight increase from the 867 gates that were removed in the previous year. These efforts were aimed at enhancing safety measures and reducing potential risks at railway crossings.

• In an effort to boost its market share in the freight segment, the Indian Railways (IR) is giving priority to the development of Gatishakti Freight Terminals. In FY23, a total of 30 freight terminals were established, representing a notable increase from the 21 freight terminals built in the previous year. These initiatives are aimed at enhancing IRs capacity and efficiency in handling freight transportation.

• As a part of the Sugamya Bharat Abhiyan, which aims to ensure ease of movement for differently- abled, the elderly, and children on railway platforms, Indian Railways is undertaking the installation of lifts and escalators at various railway stations nationwide. In FY23, a total of 215 lifts and 184 escalators were installed, marking a slight increase from the 208 lifts and 182 escalators provided in the previous year. These initiatives are focused on improving accessibility and convenience for all passengers.

• Indian Railways is committed to maximising resource utilisation by effectively mobilising scrap materials and conducting sales through e-auction. In FY23, the revenue generated from scrap sales amounted to H 5,736 crores, reflecting a growth of 7.90% compared to the H 5,316 crores achieved in the previous year. These endeavours are aimed at optimising financial returns and promoting sustainable practices.⁷

Road ahead

• The National Rail Plan aims to elevate the share of freight traffic from its current percentage of 27% to 45% by the year 2051.

• As stated by the Minister of State for Railways & Textiles, the government has outlined plans to invest USD 715 billion in rail infrastructure by the year 2030.

• One of the foremost transportation emissions mitigation strategies endorsed by the Government of India entails elevating the proportion of freight transportation facilitated by Indian Railways from the existing level of approximately 35-36% to a target of 45% by the year 2030.

• The primary aim of the National Railway Plan (NRP) is to proactively establish sufficient capacity in advance of the demand, thereby ensuring the accommodation of future growth in demand until the year 2050.⁷

Engineering and capital goods

Indias capital goods manufacturing industry constitutes a robust foundation for its involvement in diverse sectors, including Engineering, Construction, Infrastructure and Consumer goods, among others. The primary export sub- sectors within the capital goods domain comprise heavy electrical and power equipment, earthmoving and mining machinery, and process plant equipment, collectively contributing to 85% of Indias overall capital goods exports⁹

India possesses a comparative advantage over its counterparts due to its cost-effective manufacturing capabilities, driven by factors such as an affordable labour force, abundant raw materials and resources, marketing expertise, innovation, and technology. These advantageous factors contribute to increased investments in the industry, which is expected to retain its significance and grow further in the future.

The demand in the engineering sector is unique as it is a derived demand originating from other sectors like infrastructure, power, mining, oil and gas, refinery, steel, automotive, capital goods, and consumer durables. Consequently, an upswing in demand in these sectors will positively impact the demand in the engineering sector. Moreover, Indias capital goods industry plays a pivotal role by serving as a robust foundation for its involvement in diverse sectors, including engineering, construction, infrastructure, and consumer goods, among others.

Revenue growth of 16-18% is expected for Indian capital goods businesses in FY24, driven by improved execution capabilities as a result of an increase in orders. Furthermore, the industry is expected to rise by 10-12% in 2024, owing to a strong order backlog and a steady intake of new orders. The capital goods industry encompasses Engineering, Procurement, and Construction (EPC) service providers (excluding road and civil construction) along with equipment manufacturers.

The substantial increase in the order book is attributed to multiple factors, including elevated commodity prices, augmented government and private sector investments in infrastructure, and consistent progress in private capital expenditure within consumption-oriented sectors. Moreover, the investment made in Production Linked Incentive (PLI) schemes has provided additional support to bolster the order book.

White goods

The Indian white goods market, encompassing appliances such as refrigerators, air conditioners, washing machines, and microwaves, has experienced significant growth and transformation in recent years. As one of the fastest-growing consumer durables sectors in India, the white goods market has been driven by factors such as rising disposable income, urbanisation, changing lifestyles, as well as greater customer awareness of the importance of convenience and comfort. The white goods market is projected to surpass $21 billion by the year 2025, exhibiting a Compound Annual Growth Rate (CAGR) of 11%"

The market has witnessed a surge in demand, primarily due to the expanding middle-class population and the growing trend of nuclear families. As consumers seek to improve their quality of life and embrace modern living standards, there has been a noticeable shift towards the adoption of white goods appliances that enhance convenience and energy efficiency.

In recent years, the market has seen a considerable influx of technologically advanced and smart appliances that offer features like IoT connectivity and AI-enabled functionalities. These innovations have further captured consumers attention and propelled the growth of the premium segment within the white goods industry.

The escalation in the uptake of smart home appliances, driven by the desire to alleviate household burdens, is anticipated to further drive the expansion of the white goods market. Smart home appliances refer to electronic devices interconnected with a central system, capable

of being programmed, remotely controlled, or operating autonomously based on sensor inputs detecting temperature, light levels, or activity. Typically, smart appliances are designed to seamlessly integrate with other smart devices, preferably within a comprehensive smart home ecosystem. Consequently, there will be substantial demand for white goods in response to the increasing adoption of smart home appliances.

Renewable energy (solar)

India has demonstrated remarkable progress in the renewable energy sector, establishing itself as a leading participant in the global renewable energy market. This accomplishment can be attributed to the implementation of central government policies and initiatives, advancements in technology, and substantial inflows of foreign investments, which collectively have contributed to a significant expansion of renewable energy capacity in the country.

As per the latest report by the International Energy Agency (IEA), India is expected to achieve an installed renewable energy capacity of 174 GW by the year 2023, constituting approximately 37% of the nations total energy supply. India also has surpassed its target of installing 175 GW of renewable energy capacity by 2022, with a projected capacity of 280 GW by 2025¹²

The government has also taken proactive measures to facilitate the widespread adoption of renewable energy sources. The National Solar Mission, initiated in 2010, aimed to install 100 GW of solar power by 2022. This target was subsequently raised to 450 GW by 2030.

Solar and wind energy currently account for more than half of Indias total renewable energy capacity. As of May 31, 2023, the country has a total renewable energy capacity of 168.9 GW, which included 67.82 GW of solar power and 43.20 GW of wind power. India is not only rapidly expanding its renewable capacity but also witnessing tangible outcomes of these endeavours through various emerging trends that are shaping the solar and wind industries in the country.¹³

The commendable achievements in Indias renewable energy sector are strongly influenced by the swift pace of technological advancements. India stands as a trailblazer in floating solar technology, exemplified by the worlds largest floating solar power plant situated in Kerala, boasting a capacity of 500 kilowatts and projected to generate 7.5 lakh units of electricity annually. Moreover, India is host to the worlds largest solar park, the Pavagada Solar Park in Karnataka, which possesses a substantial capacity of 2 GW. This park has attracted substantial investment, further highlighting the countrys prominence in the renewable energy domain.

Installation of domestic solar rooftop systems

As a consequence of heightened awareness among residential consumers and government incentives in the form of subsidies, there has been a substantial increase in solar rooftop installations across the country.

According to the Ministry of Renewable Energy, between September 2022 and March 2023, the nation witnessed the addition of 8,877 MW of solar rooftop capacity. Noteworthy trends in rooftop adoption are being driven by PSU Banks and Non-Banking Financial Companies (NBFCs) that offer convenient financing options to industrial users and subsidies available to residential users. Additionally, the implementation of net metering policies by various distribution companies (discoms) has also played a significant role in fostering the growth of this sector.

Ultra-mega renewable energy parks (UMREP)

The government is actively implementing a scheme to establish Ultra-Mega Solar Power Parks, with the objective of providing project developers with plug-and-play benefits by ensuring statutory clearances for essential infrastructure such as land, roads, transmission systems (internal and external), and substations.

By the year 2024, the government aims to establish several ultra-mega solar parks, collectively possessing a power generation capacity of 40GW. This strategic initiative is expected to stimulate investments and expedite the development of new solar projects, as it eliminates the risks associated with land acquisition and connectivity for renewable project developers.¹⁴

Outlook

India is actively demonstrating its commitment to Green Growth, emphasising development that protects the environment through well-structured policies, subsidies, and robust engagement of the private sector. As the nations economy continues to grow steadily, it is expected that all additional energy requirements should be met from renewable sources. These positive trends align with the realisation of the need for a sustainable, secure, and technologically advanced future. Traditionally, electricity demand has been linked to GDP growth, but with an increasing focus on climate change and the adoption of electric vehicles in the passenger vehicle and two-wheeler segments, India is poised to showcase its dedication to achieving net-zero carbon emissions and providing cost- effective clean energy solutions for its energy needs.

Company overview

Pennar Industries Limited (PIL) stands as one of Indias prominent engineering companies, renowned for its innovative engineering solutions. With a legacy spanning over four decades, Pennar embodies quality, precision, and excellence, constantly striving to exceed expectations. The Companys journey began with its manufacturing plant in Isnapur, near Hyderabad, and has since evolved into a diversified engineering company with comprehensive end- to-end capabilities.

Pennar offers a comprehensive product line that is organised into Engineered Products and Engineering Solutions and serves six key sectors: Automotive, Construction, General Manufacturing, White Goods, Railways, Tubes, Body in White, Boilers and Hydraulics. The Company possesses a strong and extensive presence across India, and it has further established its global footprint with operations in the USA and France.

Pennar is capable of generating high-quality items using cutting-edge equipment such as laser cutting, plasma cutting, transfer presses, and CNC machines. All of its manufacturing plants adhere to rigorous ISO standards and operate under stringent Standard Operating Procedures (SOPs).

At the core of Pennar Industries values is a driving philosophy to maximise customer satisfaction by delivering products and services of excellence. This commitment has solidified the Companys reputation as a powerhouse of engineering prowess and continues to inspire its pursuit of engineering excellence.