According to India Inc, private capital expenditure will resume shortly

According to CRISIL Research, the top 300 listed businesses’s capex spending in the first half of fiscal 2023 accounted for approximately 60% of the previous fiscal.

The recent statement by top economic advisor V. Anantha Nageshwaran that the private sector must play a larger role in increasing investment was made in the backdrop of India Inc’s reluctance to spend.

While the majority of corporations claimed they are eager to invest and would take action soon, some are still on the sidelines.

Sanjiv Mehta, managing director and CEO of Hindustan Unilever (HUL) and Ficci president, stated that the private sector’s risk appetite has not diminished. “If India continues to expand at 6-7%, I see no reason why capacity utilisation won’t rise and people would begin to invest,” he told CNBC TV 18. He stated that corporations such as HUL and many others will continue to invest, as will others. “Capacity utilisation was between 60 and 70 percent throughout the Covid era, and it will continue to rise. According to Mehta, a significant amount of capacity is trapped in the form of non-performing assets, and the landscape will drastically change if they are released through National Company Law Tribunals.

Anish Shah, managing director and CEO of Mahindra & Mahindra, stated at the same gathering that his company will continue to invest in the India narrative. “The private sector is making significant investments, and Mahindra Group in particular is expanding its vehicle capacity. We just revealed a $10,000 billion investment in electric vehicles in Maharashtra. We want to produce goods in India for the rest of the world.

However, not everyone is as enthusiastic. According to Crisil statistics, capacity utilisation in most industries exceeds 65% (FY23 forecasts), with steel and tractors close to 80%.

Some argue that there are still few indicators that the business sector is planning major investments. State and federal governments continue to do the majority of the heavy lifting in terms of capital expenditure.

According to Amit Agarwal, Group CFO at Raymond, there is a mixed perspective on private capex.

“On the one hand, increased private sector capex investment is the outcome of China-Plus-One strategy, production linked incentive (PLI) programmes implemented for particular industries, and the last few decades of significant industrial development.

. Inflation and rising borrowing costs, on the other hand, are deterrents when deciding on capital expenditure,” he remarked. Corporates, according to Agarwal, are hesitant to engage in long-term initiatives.

According to Murali Ramakrishnan, MD and CEO of South Indian Bank, stressed industries such as cement (which has been negatively impacted by increased coal costs) and unpredictable pricing in the steel and jewellery sectors are further reasons for big-ticket capex not occurring in these sectors.

“Corporates will only opt for capital growth when they consider the economy is steady and will not encounter any surprises. Today, there is a liquidity crunch, unpredictable interest rates, and a raging global conflict. As a result, it is not in the best interests of any organisation to consider a large financial investment for a new project. It may be happening in certain industries, but not elsewhere,” Ramakrishnan remarked.