At decadal low of 33%, private capex share dips in FY24

The private capital expenditure’s share in the overall investments in the economy dipped to a decadal low of 33 per cent in last fiscal, domestic rating agency ICRA said on Monday.

According to the report, the unlisted players, among the private companies, were subdued in investments as compared to the listed entities.

Noting that for the last few years, the government has been driving investments, leading to concerns in some quarters over the private sector’s absence and its impact on the overall economic activity, the report said the private sector has instead focused on deploying excess cash at reducing loan burdens rather than investing in new facilities, choosing to run at high capacity utilisation.

ICRA chief rating officer K Ravichandran said weak domestic consumption, especially urban, muted export demand, and the influx of cheap Chinese imports in some sectors, among other factors, restricted the capacity expansion plans of Indian corporates.

“Gross Fixed Capital Formation (GFCF), encompassing the gross addition to fixed assets and intangibles, constitutes around 30 per cent of India's nominal GDP, making it the second largest component after private final consumption expenditure,” the agency said, while illustrating the importance of investments in the economy.

Noting that the GFCF has been slowing down since FY23, largely due to the slowdown in the private sector's activity, the agency said the government capex and household investments in real estate have helped it.