New Delhi: India’s emerging sectors, including Artificial Intelligence (AI), semiconductors, and defense, are witnessing a surge in investments, yet traditional bank and NBFC financing remains limited.
A recent report by Union Bank of India highlights that these sectors are attracting significant capital, with AI, semiconductors, and defense each drawing over ₹5 lakh crore in announced public and private investments.
However, the report points out that banks are not always the primary financiers for these projects. Financing patterns vary; manufacturing and power projects largely rely on debt, while AI and space technology often depend on equity funding. A major concern for lenders is rapid technological obsolescence, with chip nodes evolving every 3-5 years and GPUs refreshing every 18-24 months. Additionally, payment delays from entities like the Ministry of Defence and discoms, coupled with long investment recovery periods—5-8 years for semiconductors and 7-10 years for space—exceed typical loan tenors, making banks hesitant.
To bridge this gap, the report suggests banks establish specialized desks for sectors like semiconductors, hydrogen, data centers, and battery storage. It recommends innovative financing solutions such as milestone-linked disbursements, receivables securitization, and equipment leasing. Looking ahead, sectors like storage, ATMP (Advanced Packaging), and the defense MSME tier are expected to drive future demand.
AI leads with approximately ₹5.9 lakh crore in investments, followed by semiconductors at ₹5.27 lakh crore and defense at ₹5.07 lakh crore. Biotechnology and green hydrogen are also emerging as key investment hubs, indicating a robust future for India’s capital expenditure growth, supported by government initiatives and private funding.