For the past few years, the government led on the investment front while private capital expenditure, which has a trickle-down effect on growth and employment, did not take off.
“Analysis of Industrial Entrepreneur’s Memorandum (IEM) and Business Expectation Index (BEI) data of 2005 to 2022 shows that the Indian economy is at the cusp of a new private corporate capex cycle,” the rating agency said in a note.
The IEM data is collected by the government’s Department for Promotion of Industry and Internal Trade, while data related to BEI is released by the Reserve Bank of India (RBI) in its industrial outlook survey of corporate entities.
The agency said a recent RBI study on private capex allocations hitting a decade high in 2023-24 also illustrates a pick-up in private corporate capex.
There is a steady uptick in project allocations across all ticket sizes and there could be a significant push from large projects of over Rs 1,000 crore in this cycle, the agency said. India’s push for roads and renewable energy will continue to dominate the country’s investment cycle, while recent expansions in railways and electronics suggest a more ambitious shift away from modular capex, it said. Crude oil, base metals, power and telecom continue to dominate the capex activity, the agency said, adding that broad basing is visible with increase in capex activity across cement, chemicals, healthcare and logistics.
The textile sector witnessed significantly higher investments during FY23, but FY24 activity could remain tepid, it said.
The agency said there appears to be a correlation between IEMs and BEI, and added that except in 2009, which was impacted by the global financial crisis, the value of BEI between 2008 and 2011 remained higher than 120, indicating higher business confidence in the future of the economy.
As a result, IEM at Rs 17.36 lakh crore peaked in 2010.
On the other side, the BEI remained flat and below 115 during 2013-2020.
BEI recovered sharply to 126.2 in 2021, and to the highest level of 136.1 in 2022. This also got reflected in IEMs rising to Rs 7.71 lakh crore in 2021 from Rs 4.15 lakh crore in 2020.
The IEM amount could have been much higher in 2022 than the Rs 4.24 lakh crore, if not for the Russian invasion of Ukraine and the continuing war, which led to corporate houses holding back on proposals, the agency said.
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