In a significant upward trend, private sector capital expenditure (capex) in India has seen an impressive growth of nearly 7% from fiscal year 2021 to fiscal year 2024, reaching an estimated ₹4.22 trillion. The Ministry of Statistics and Programme Implementation (MoSPI) revealed this data in a recent report. Looking ahead, projections suggest that capex will escalate to ₹6.56 trillion in FY25, before tapering off to ₹4.89 trillion in FY26, reflecting cautious optimism among businesses about their future investments.

Insights from the MoSPI Survey

This data comes from MoSPI’s first-ever forward-looking survey regarding “Private Sector Capex Investment Intentions,” which surveyed 3,064 enterprises, with 2,172 participating in detailing their future investment plans. The ministry noted a careful approach by these companies when it comes to declaring their capex intentions.

• Caution in Projections: The estimates for FY26 should be interpreted with care due to the conservative outlook and reluctance among companies to fully disclose their investment strategies.

Growth in Gross Fixed Assets

The survey also highlighted a notable increase in the average gross fixed assets (GFA) per enterprise within the private corporate sector. In 2021-22, the GFA averaged ₹3,151.9 crore, which rose by 4% to ₹3,279.4 crore in 2022-23 and saw a remarkable jump of 27.5% to ₹4,183.3 crore in 2023-24.

• Understanding Gross Fixed Assets: GFA includes the original cost of all tangible, long-term assets such as property, plant, and equipment (PP&E), prior to depreciation.

In terms of industry specifics, the highest GFA per enterprise was noted in the electricity, gas, steam, and air conditioning supply sector, exceeding ₹14,000 crore. Manufacturing enterprises followed closely, with GFA ranging from ₹7,000 crore to ₹10,000 crore.

Capex Breakdown by Sector

The survey indicated that enterprises primarily engaged in manufacturing accounted for more than 65% of the total gross fixed assets from 2021-22 to 2023-24. The electricity, gas, steam, and air conditioning sector contributed between 8-10%.

• Capex Estimates: The capex per enterprise was estimated at:
  • ₹109.2 crore for 2021-22
  • ₹148.8 crore for 2022-23
  • ₹107.6 crore for 2023-24
  • Provisional estimate of ₹172.2 crore for 2024-25

Future Investment Intentions

According to MoSPI, a significant 40.3% of the surveyed enterprises plan to allocate funds for core asset capex in 2024-25. Meanwhile, 28.4% aim to invest in enhancing existing assets.

• Purpose of Capex:
  • 49.6% for income generation
  • 30.1% for upgrades
  • 2.8% directed towards diversification
  • 17.5% for other purposes

MoSPI categorizes enterprises based on turnover: manufacturing (₹400 crore or more), trade (₹300 crore or more), and others (₹100 crore or more), culminating in a final survey group of 16,025 enterprises.

Conclusion

As this marks the inaugural round of the survey, the findings are preliminary and may evolve in subsequent analyses. The results reflect the responses of larger enterprises within specified turnover brackets and may not fully represent the entire private corporate sector. As the landscape of capex continues to unfold, it remains crucial to monitor these trends for insights into India’s economic future.

For further reading on India’s economic growth strategies, consider checking insights from Deloitte on capital expenditure focus amidst global uncertainties.