Global firm Nomura has termed the recovery in capital expenditure by the private sector in India as ‘sober’. This is slightly different from what researchers at the Reserve Bank of India have opined.

“We estimate that private capex projects financed picked up to 1.4 per cent of GDP in FY24 vs 1 per cent of GDP in FY23,” Nomura said in research report prepared by its economists Aurodeep Nandi and Sonal Verma. The report uses data from the RBI. While it acknowledged the rise, it also said it is “still moderate compared with historical levels. FY25 is currently tracking 0.8 per cent of GDP.”

An article, ‘Private Corporate Investment: Growth in 2023-24 and Outlook for 2024-25’ authored by Kamal Gupta, Rajesh B Kavediya, Sukti Khandekar, and Snigdha Yogindran (all from Department of Statistics and Information Management, the RBI) presented an analysis of investment intentions of private corporates based on projects sanctioned by banks/FIs during 2023-24.

It highlighted that the total envisaged cost of the projects financed by banks/FIs reached a new high of ₹3.91 lakh crore during 2023-24, with 54 per cent planned to be invested by the year-end. “The phasing profile of the pipeline projects finance suggests that the envisaged capex will increase significantly to ₹2.45 lakh crore in 2024-25 from ₹1.59 lakh crore in 2023-24,” the article said. It also mentioned that rising domestic demand and capacity utilisation, improved profitability of corporates, sustained credit demand, business optimism, and the government’s thrust on infrastructure development, along with policy measure to encourage investment activities, bode well for private capital investment.

Acknowledging the progress, Nomura’s research report said that there has been a pick-up in the financing of power, construction, and electronics projects, with elevated funding continuing for roads and metals. The sharp rise in the ‘others’ category primarily reflects an increase in the ports/airports, cement, and transport-related sectors. The pre-eminence of infrastructure projects underlines the impact of the government’s capex push, it said.

“That said, not all data on capex are uniformly positive,” it cautioned. Quoting data from CMIE, the new investment projects (IP) have slid to 7.3 per cent of GDP in Q2 from 11.5 per cent of GDP in Q4 2023. Within IP, capital goods output growth has moderated to an average of 3.3 per cent y-o-y in H1 2024 from 8.1 per cent in 2023, while infrastructure goods output growth has also fallen to 6.7 per cent from 10.4 per cent. “In our view, while corporate and bank balance sheet strength has improved, a more comprehensive recovery is contingent on a broad-based pickup in consumer demand,” the report said.

Meanwhile, the article by a researcher at the RBI said that the healthy balance sheets of both corporates and banks, improved corporate profitability, sustained credit demand, rising capacity utilisation, and optimism in business sentiments — as reflected in the forward-looking enterprise surveys conducted by the RBI as well as other agencies — provide a conducive environment for private corporates to undertake investments going forward. On the downside, “global financial market volatility, protracted geopolitical tensions, and geoeconomic fragmentation could dampen the investment plans. Overall, the investment cycle is expected to remain upbeat, and its sustainability needs to be watched closely,” it said.

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