“We expect a pickup in corporate capex when the Union budget is presented after the general elections,” said Aditi Nayar, chief economist at ratings firm Icra.
Signs of a recovery in investment were visible in the GDP data for the second quarter, released in November. Gross fixed capital formation, a proxy for investment, rose in double digits in July-September, also outpacing consumption growth for the fourth straight quarter.
“After 9.6% growth in FY23, real investments increased by 9.9% YoY in the second quarter of FY24, more than double the growth of 4.3% YoY in real consumption (private+government),” economists from Motilal Oswal Financial Services said in a report.
According to private surveys by industry bodies, including the Federation of Indian Chambers of Commerce and Industry, most sectors over the past few months have recorded an 80-90% capacity utilisation, seen as a trigger point for initiating investments.The median estimate in an ET poll of economists conducted last month was for economic growth of 6.3% in fiscal 2025, with inflation slowing to 4.7% – closer to the Reserve Bank of India’s target of 4% – that could lead to a cut in the policy rate to spur the economy.The International Monetary Fund, in its latest report, pointed out that gross investment as a percentage of GDP is expected to rise to 31.9% in FY25, from 31.7% in FY24.
Economists maintain that a few sectors, driven by infrastructure and government spending, will lead the likely pickup in private investment. “May see a pickup in infra sectors of cement, steel and some production-linked incentive sectors, where production is expected to take off next year,” said Rahul Bajoria, managing director and head of EM Asia (ex-China) economics at Barclays.
Over the medium term, they expect a host of other sectors also to witness a rise in private investment.
