Capital goods or heavy machinery and equipment, a key barometer of economic health, may be showing first signs of a revival.

Capex by consumer-facing companies has led to a minor uptick in orders, MS Unnikrishnan, managing director and chief executive officer of Thermax Ltd., told BloombergQuint in an interview. These industries, pharmaceuticals and food processing in particular, are growing irrespective of economic disturbances due to increased consumption and investments, said the head of Pune-based equipment maker.

Demand for capital goods had remained sluggish as companies were not investing in new projects to expand capacity. Investments in sectors like power, steel and infrastructure had got stuck, adding to stressed assets of Indian banks. Demonetisation and the Goods and Services Tax further disrupted the economy.

Unnikrishnan is seeing some capex expansion in the textiles, alcohol and dairy industries as well, but none in steel, oil and gas and power because infrastructure has been on a standstill.

That may change as the government’s infrastructure and affordable housing push is expected to boost demand.

Good times lie ahead for the construction industry, with schemes like the Bharatmala project. The “trickling impact” of road construction will come next year, Unnikrishnan said.

GST Woes

Thermax’s revenue for the quarter ended September declined as the company missed out on input tax credit. The government had mentioned that input tax credit may be available for one more month, or a grace period of 30-60 days, for various industries, he said. Capital goods industry was an exception, Unnikrishnan said.

Discounting the GST impact, the company’s revenue would have risen 5-7 percent as against a dip of 6 percent, he said.

Watch the full interview here:

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Source: Global Economy