India has its own structural growth story beyond current global focus on AI, says Jefferies

New Delhi: India continues to have its own structural growth story beyond the current global focus on artificial intelligence, with energy, electrification, renewable power, manufacturing and rising private-sector investment emerging as key drivers, according to a report by Jefferies.

Jefferies said that after spending more time in India, it believes the country's strongest long-term structural growth opportunity in the private sector is linked to energy, particularly the expansion of renewable power and solar energy.

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The report pointed to China's experience, where large-scale grid expansion and advances in battery storage technology have helped create economies of scale. It said solar power is already cheaper than coal in China because of battery storage technology.

According to Jefferies, if a similar trend develops in India, the resulting fall in the cost of power could provide a major boost to the country's manufacturing ambitions.

It said, "Still at a time when India has been out of favour on the reverse AI perception, it is worth reminding non-specialists that India continues to enjoy its own structural growth story which will prove resilient at a time when the current near all-consuming focus on AI diminishes".

The report also linked India's energy transition with the country's broader industrial growth. It noted that the share of electricity in India's total final energy demand is also expected to rise from 19 per cent in 2023 to 25 per cent in 2035, driven by an increase in renewable energy as well as improvements in energy storage and smart demand management, according to the report.

Jefferies said this growing electricity requirement and the expansion of renewable energy could become an important part of India's structural growth story.

The report also highlighted India's position in traditional manufacturing. It said that despite the common perception that India has lagged in manufacturing compared with services, the country is already second only to China globally in several traditional manufacturing areas, including crude steel, cement, ammonia, mobile phones and solar modules.

However, Jefferies also pointed to the large gap in production scale between the two countries. China produced 960.8 million tonnes of crude steel and 1,700 million tonnes of cement last year, compared with 164.9 million tonnes of crude steel and 470 million tonnes of cement in India.

Another indicator highlighted by the report was the recent rise in private-sector capital expenditure. India's annualised nominal gross fixed capital formation to GDP ratio increased from 31.4 per cent in the four quarters to December to 32.4 per cent in the four quarters to June.

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Machinery imports have also increased sharply, rising from USD 29 billion in FY21 to USD 62 billion in FY26 and USD 66 billion in the 12 months to August.

Jefferies said these developments point to a structural growth opportunity that is not dependent only on the global technology or AI cycle.