A new analysis paints a bullish picture for several key sectors of the Indian economy, predicting a period of sustained and robust earnings expansion. According to a report by the rating agency ICRA, the electronics manufacturing services (EMS), telecom, and retail sectors are poised to deliver strong earnings growth over the next two years. This optimism is rooted in a combination of favorable domestic demand, strategic government initiatives, and improved operational dynamics.
Electronics Manufacturing Services (EMS) on a High-Growth Trajectory
The EMS sector in India is expected to be a standout performer, with projections indicating a compounded annual growth rate (CAGR) of 20-25% over fiscal years 2025 and 2026. This impressive forecast is largely fueled by the government's ambitious Production Linked Incentive (PLI) schemes. These schemes are designed to boost domestic manufacturing and have successfully attracted major global players to set up shop in India.
Furthermore, the report highlights a significant shift in sourcing strategies. Original equipment manufacturers (OEMs) are increasingly looking to diversify their supply chains, a trend known as "China Plus One." India, with its large domestic market and policy support, is emerging as a prime beneficiary of this strategic realignment. The growing local demand for consumer electronics, including smartphones, is providing an additional, powerful tailwind for EMS companies.
Telecom Sector: Stability and Rising Revenue Per User
After a period of intense competition and consolidation, the Indian telecommunications industry is entering a phase of stability and healthy growth. ICRA anticipates the sector's revenue to grow by 7-9% in fiscal year 2025, building on the strong performance expected in the current fiscal year 2024. A key driver of this growth is the consistent increase in Average Revenue Per User (ARPU).
The report notes that the industry's shift from a fiercely competitive landscape to an oligopoly with three major private players has allowed for more rational pricing and improved profitability. Continued investments in network infrastructure, especially the rollout of 5G services, are expected to enhance data consumption and support higher revenue generation. The telecom sector's improved health is seen as a critical enabler for the broader digital economy.
Organized Retail to Benefit from Urban Consumption
The organized retail sector in India is also set for a bright outlook, with an expected revenue growth of 8-10% in fiscal year 2025. This growth will be primarily driven by resilient urban consumption trends. As economic activity remains strong, consumer spending on discretionary items, apparel, and general merchandise is holding up well.
ICRA's analysis points to several factors supporting this growth. These include the expansion of retail footprints by major players into Tier-II and Tier-III cities, the growing adoption of omnichannel sales strategies blending online and offline experiences, and a gradual improvement in operating margins as scale efficiencies kick in. The sector's performance is closely tied to overall economic sentiment and employment levels, which currently appear supportive.
Broader Economic Implications and Sectoral Contrasts
The strong performance forecast for these three sectors—EMS, telecom, and retail—contrasts with the more moderate outlook for some other industries. The report serves as a microcosm of India's evolving economic story, where sectors aligned with digitalization, domestic manufacturing, and consumption are pulling ahead.
This growth is not happening in isolation. It is interconnected; for instance, a robust telecom network enables digital payments and e-commerce, which in turn fuels retail. Similarly, a thriving EMS sector strengthens the electronics retail ecosystem. The ICRA report underscores the importance of continued policy support and private capital expenditure to sustain this multi-year growth cycle. The positive trajectory of these sectors is a vital component of India's broader ambition to become a global economic powerhouse.
