The share of private capital expenditure (capex) in India’s economy has dropped to a decade-low of 33% in FY24, as reported by ICRA. This decline is primarily attributed to reduced investments by unlisted companies, while listed entities showed some growth in their capex spending.
Several factors contributed to this slowdown, including weak domestic consumption, muted export demand, and the influx of cheaper imports from China, which restricted the capacity expansion plans of Indian corporates. Additionally, many private companies focused on reducing debt rather than investing in new facilities. Despite this, the government has been driving investments, and household investments in real estate have helped maintain some momentum in overall capital formation.
Experts suggest that improving corporate cash flows and reduced debt levels could create favorable conditions for a revival in private capex.
