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Private capex has been tepid in the last four years
| Photo Credit:
Lim Weixiang – Zeitgeist Photos
India Inc’s spending on capital projects — or the lack of it — has been keenly debated. As the Centre has looked to normalise its fiscal deficit with lower increase in capex in FY26, the private sector has been slow to pick up the baton. This makes the National Statistics Office’s forward-looking survey on private sector capex intentions, the first one to be conducted, timely. NSO sought online responses from 5,380 large private firms meeting certain turnover and asset value thresholds. Only 3,064 firms responded, and the survey’s findings are based on these responses.
The aggregate trends in capex show the private sector’s lack of interest in capital investments over the last four years. After raising their total capex spends by 45 per cent from ₹3.94 lakh crore to ₹5.72 lakh crore between FY22 and FY23, these firms cut back to ₹4.22 lakh crore in FY24. They intend to spend ₹6.56 lakh crore in FY25 but expect a drop to ₹4.88 lakh crore in FY26. While the FY24 dip was perhaps due to upcoming general elections, muted plans for FY26 are harder to explain. The surveyed firms seem to have had muted capex intentions even before Trump’s reciprocal tariff announcements on February 13 (the survey was conducted from November 2024 to January 2025). As the tariff announcements have raised the probability of Chinese dumping, the picture on capex may be worse than the survey projects.
The estimated capital expenditure per enterprise for FY25 was also underwhelming at ₹172 crore, with 53 per cent going to machinery, 10 per cent to buildings and 6 per cent to intangibles and intellectual property. This seems low given that the survey covered firms with turnover exceeding ₹100-400 crore. About 43 per cent of responding firms planned zero capex for FY26, while 20 per cent foresaw no change. Only 32 per cent of the firms expected an increase in capex. Clearly, favourable fiscal and monetary policy changes over the last six months, such as the Budget tax cuts and easing of policy rates by 50 basis points, are yet to revive animal spirits. Capex activity is rather concentrated in a few segments. The manufacturing segment at ₹1.5 lakh crore in FY25 plans a 40 per cent increase to ₹2.1 lakh crore in FY26. Construction is expected to see a rise from ₹11,856 crore to ₹16,265 crore. This should augur well for employment. However, a deeper dive is needed to understand why activities such as transportation and storage (₹1.35 lakh crore in FY25 to an expected ₹23,478 crore in FY26) and communication (₹1.53 lakh crore to ₹1.09 lakh crore) are seeing sharp cutbacks.
The survey may need methodology changes. The low response rate suggests that surveying all firms beyond certain turnover and asset thresholds may not generate too may insights. Instead, including only sectors and firms that are capital-intensive may yield better results. Capturing the reasons why a firm is scaling down capex or budgeting for zero capex could also lead to qualitative insights for policymakers.
Published on May 5, 2025
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