Indian corporates to witness 10%-12% capex growth in FY24: Report

Supportive policies, localisation efforts by domestic companies, and multinational corporations' risk reduction strategies may drive private investments in the medium term

March 29, 2023

The Capex saw a 16% growth in FY22

Indian banks have addressed their non-performing loans and improved their credit costs over the years

India is a net importer of energy and exports 21% of its output

The secular nature of most Capex drivers should help to mitigate these risks over the medium term

The increasing capital expenditure (Capex) trend among Indian corporates is anticipated to continue and rise at a rate of 10%-12% per annum in the upcoming fiscal year until March 2024, according to a report by Fitch Ratings.

The report noted that Capex remained stagnant between FY19 and FY21, but saw a 16% growth in FY22. The predictions are applicable to the eight state-owned enterprises and twenty-one privately held Fitch-rated corporates in India.

Experts stated that the growth opportunities emerging from India’s recent supply-side policies, localisation efforts by domestic corporates, and the desire by multinational corporations to lower their risks in global supply chains may attract more significant private investments in the medium term. Nevertheless, they cautioned that slower-than-expected progress could pose risks.

Government reforms, such as the Goods and Services Tax (GST), bankruptcy code, and more recent initiatives like a lower corporate tax rate, the Production Linked Incentive (PLI) schemes, and rising state expenditure on infrastructure, could further encourage investments. On top of that, Indian banks have addressed their non-performing loans and improved their credit costs over the years, positioning themselves to support corporate funding requirements.

The report also pointed out that India’s investment demand could be at risk due to currency pressures caused by high commodity prices and a weak global economic outlook. India is a net importer of energy and exports 21% of its output, which adds to these risks.

Furthermore, inflationary pressures and rising interest rates could also temper the Capex outlook for corporations with a smaller scale and/or weak financial profile. Nevertheless, the secular nature of most Capex drivers should help to mitigate these risks over the medium term.

Source: Reuters

Recent Articles

India bucks trend with steel production surge amid global decline

May 23, 2024

In April, India emerged as the only country among the …

Read More

India to launch custom AI model with INR 2,000 cr. investment

May 22, 2024

The Union government plans to develop its foundational artificial intelligence …

Read More

India to boost wind energy capacity by 25 GW by 2028

May 22, 2024

India is set to substantially increase its wind energy capacity, …

Read More