While the Government of India has implemented a multi-pronged strategy, including aggressive public capital expenditure (capex) outlays in infrastructure, targeted production-linked incentive (PLI) schemes, and FDI liberalisation with new free trade agreements (FTAs), over the last few years to catalyse private sector investments, private capex in India has been languid after capex per enterprise peaked at ₹260 crore in FY23.
Brokerage firm Systematix Shares and Stocks (India), in its report on 15 October, highlighted the findings of capex surveys of the National Statistics Office (NSO), which showed capex per enterprise peaked at ₹260 crore in FY23 before falling to ₹160 crore in FY26, with intended FY27 spending showing no improvement.
Moreover, the conversion of intended capex into actual spending has weakened significantly, with the realisation ratio (RR) declining from 112% in FY23 to 96% in FY25, suggesting FY26-FY27 investments may undershoot current plans.
The provisional capex for FY26 and the intended capex for FY27 stand at ₹160 crore each, significantly lower than the actuals in FY23-FY24.
Private capex losing momentum
As per Systematix report, the survey showed capex in the manufacturing sector declined from ₹220 crore in FY22 and FY23 to ₹210 crore in FY24 and ₹170 crore in FY25, before recovering to ₹210 crore in FY26. The intended capex per enterprise for manufacturing in FY27 stands at ₹190 crore.
Agriculture, forestry and fishing, construction, wholesale and retail trade and repair of motor vehicles and motorcycles, information and communication, professional, scientific and technical activities, education, human health and social work activities, arts, entertainment and recreation are among the segments which have recorded lower or stagnant capex per enterprise in recent years.
However, non-conventional energy is exhibiting a positive trend, led by strong momentum in solar investments, as per the survey. Robotics is also emerging as a bright spot due to increasing automation and digital transformation trends.
“Solar energy capital expenditure was reported by 6.2% of private enterprises for FY26, moderating to 4.0% of private enterprises intended for FY27. Robotics-related capital expenditure proposals were reported by 2.8% of private enterprises for FY26, moderating to 2.3% intended for FY27,” said Systematix.
Can it delay the stock market revival?
Even though the Indian economy remains on a strong footing, corporate investment behaviour appears cautious due to weak demand visibility, slowing profit growth, rising costs, and geopolitical uncertainties.
According to Systematix, private capex may remain a laggard unless demand conditions improve meaningfully, leaving public investment and a handful of themes such as energy transition and automation to shoulder the burden of capital formation.
However, experts believe while the revival of private capex is important, the market at this point is focussing on near-term headwinds.
“The market has been weighed down mainly by three factors: one, the elevated crude prices; two, high US bond yields; and three, sustained FII selling. Capex has been deficient in India, as general demand conditions have been weak in many sectors and the highly uncertain geopolitical developments have been impacting the confidence of entrepreneurs to invest. However, big investments are happening in sectors like renewable energy, data centres, power and digital infrastructure,” noted V K Vijayakumar, Chief Investment Strategist at Geojit Investments.
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Disclaimer: This article is for educational purposes only and does not constitute investment advice. The views and recommendations expressed are those of individual analysts or broking firms, not Mint. We advise investors to consult with certified experts before making any investment decisions, as market conditions can change rapidly and circumstances may vary.
