Jefferies identifies space, semiconductors, data centres, electronics, solar manufacturing and aerospace as six sectors that could shape India’s next industrial growth cycle
India could see its next phase of industrial growth come from six sectors attracting fresh investment and policy support, according to global brokerage Jefferies.
The sectors are space, semiconductors, data centres, electronics, solar manufacturing and aerospace.
Jefferies has described this shift as India’s new industrial revolution in its latest India Equity Strategy report.
The brokerage expects India’s data centre capacity to rise from about 2 GW to nearly 10 GW over the next five years. The expansion could require about $45 billion in investment.
India’s space economy could also grow to $40 billion to $45 billion by 2030 from about $8.4 billion in 2023, according to Jefferies.
According to the report, the semiconductor sector has already attracted around $20 billion of investment, while the government is backing a second phase of its semiconductor programme with an outlay of about $13 billion.
Jefferies said the combination of government policy, private investment, a large domestic market and India’s existing manufacturing base is creating opportunities in these six industries.
Data centres could attract $45 billion
Data centres are likely to be one of the largest investment opportunities.
India’s colocation data centre capacity has grown about fivefold in the past five years to around 2 GW.
More from BusinessJefferies expects capacity to rise another fivefold to nearly 10 GW over the next five years.
The brokerage estimates that this expansion could require about $45 billion in facility capital expenditure.
It also sees a potential revenue opportunity of about $9 billion for data centre operators.
The impact would not be limited to data centre companies. The expansion could create demand for construction companies, real estate developers, power equipment suppliers, cooling systems and network infrastructure.
The growth of cloud services and the increasing use of artificial intelligence are also expected to raise demand for computing infrastructure.
Space industry targets fivefold growth
The space economy is another major opportunity highlighted by Jefferies.
India opened the space sector to private companies in 2020. Since then, startups have entered areas including launch services, satellite technology, earth observation and other space-based applications.
Jefferies said the government is targeting growth in the space economy from about $8.4 billion in 2023 to $40 billion to $45 billion by 2030.
That would represent an expansion of about five times in seven years.
The brokerage highlighted companies such as Skyroot Aerospace, Pixxel, Agnikul Cosmos and Digantara as examples of the growing private-sector space industry.
The focus is also changing. The industry is moving from early-stage technology development towards commercial operations.
Semiconductor investment moves into execution
India is also trying to build a semiconductor industry from the ground up.
Jefferies estimates that around $20 billion of investment has already been triggered in the sector.
This includes a semiconductor fabrication plant under construction and several projects for assembly, testing and packaging of chips moving towards production.
The government has launched a second phase of its semiconductor incentive programme with an outlay of about $13 billion.
The aim is to build a wider ecosystem around chip manufacturing. This includes chip design, semiconductor equipment, materials, advanced packaging, research and development and skilled workers.
Jefferies said India is building the foundations of a semiconductor ecosystem.
It also pointed to challenges. India still needs deeper supply chains and more specialised talent. It also faces strong competition from countries that already have established semiconductor industries.
Electronics industry moves beyond assembly
Electronics manufacturing is another sector where Jefferies expects a major change.
India has become a large manufacturing base for mobile phones and other electronics. The next step is to produce more of the components locally.
Jefferies expects domestic value addition to rise to around 50 per cent of the mobile component bill of materials over the next six years from less than 20 per cent currently.
This would mean a larger share of the value created in electronics manufacturing would stay within India.
Printed circuit boards are another area identified by the brokerage.
The market is estimated at around $5 billion but remains heavily dependent on imports.
Government schemes aimed at electronics component manufacturing are expected to encourage companies to build more of this supply chain within the country.
Solar manufacturing aims for deeper localisation
India has also expanded its solar manufacturing capacity in recent years.
Jefferies estimates that around 35 GW of solar cell manufacturing capacity is already operational.
Another roughly 100 GW is under construction.
The brokerage expects about 90 per cent of the solar manufacturing value chain to be localised by 2030.
Production-linked incentives and domestic content requirements are helping manufacturers expand capacity and reduce dependence on imports.
The next challenge will be competitiveness. Indian companies will have to compete with large global producers on cost, technology and scale.
Aerospace could gain from global supply chains
Aerospace is the sixth sector identified by Jefferies.
Boeing and Airbus already source about $1.4 billion to $1.6 billion worth of products and services from India every year, according to the brokerage.
Jefferies expects Indian companies to gain a larger share of the global aerospace supply chain as manufacturers look to diversify sourcing.
Companies including Aequs, Azad Engineering, Bharat Forge, Dynamatic Technologies, Motherson and Sansera have developed relationships with global aerospace manufacturers and major suppliers.
India has a large engineering workforce and an established manufacturing base. Jefferies believes these strengths could help the country attract more aerospace work.
What could drive the next industrial cycle
The six sectors identified by Jefferies are at different stages of development.
Data centres and electronics already have established businesses in India. Semiconductors and private space are still building the infrastructure, skills and supply chains needed to operate at scale.
Jefferies sees a common factor across all six sectors.
Government support is creating incentives for investment. The domestic market provides demand. Private companies are entering industries that were previously dominated by the government or foreign suppliers. At the same time, companies are trying to produce more components within India.
This combination could help India move beyond traditional manufacturing and build capabilities in technology, digital infrastructure, clean energy and advanced engineering.
The opportunity, however, will depend on execution.
