RBI paper sees 54% rise in private capex to ₹2.45 lakh cr in FY25

The total envisaged cost of the projects financed by banks and financial institutions reached a new high of ₹3.91 lakh crore during 2023-24, with 54% planned to be invested by the year ending 2024-25, according to a research paper released by the Reserve Bank of India.

The phasing profile of the pipeline projects finance suggests that the envisaged capex will increase significantly to ₹2.45 lakh crore in 2024-25 from ₹1.59 lakh crore in 2023-24, the RBI paper titled ‘Private Corporate Investment: Growth in 2023-24 and Outlook for 2024-25’ says.

Rising domestic demand and capacity utilisation, improved profitability of corporates, sustained credit demand, business optimism and government’s thrust on infrastructure development, along with policy measure to encourage investment activities, bode well for private capital investment, the paper released as part of the RBI bulletin says.

Capital investment by private corporates, a major driver of India’s long-term growth, has been gaining traction, after moderating during the COVID-19 pandemic. Healthy balance sheet of banks and private companies, improved corporate profits, rising capacity utilisation, sustained credit demand, optimism in business sentiments and government’s thrust on public infrastructure bode well for private capital expenditure (capex) cycle, which reflects investment climate and growth potential of the economy and facilitates economic progress, the central bank’s paper says.

The Reserve Bank has been tracking private capex plans through monitoring of the projects that are funded by banks and financial institutions for assessing investment outlook.

The state-wise distribution of projects sanctioned revealed that the top five states viz., Gujarat, Maharashtra, Karnataka, Andhra Pradesh and Uttar Pradesh together accounted for about 55% of the total cost of projects sanctioned during 2023-24.

Industry-wise distribution of projects sanctioned during 2023-24 indicates that the infrastructure sector remained the major sector accounting for 55.5% share in the total cost of projects, primarily driven by investment in ‘Roads & bridges’ and ‘Power’.

The significant rise in envisaged capital investment of private corporates, based on the projects sanctioned by banks and financial institutions during 2023-24, points to upbeat investment cycle, the RBI says.

“Healthy balance sheets of both corporates and banks, improved corporate profitability, sustained credit demand, rising capacity utilisation, and optimism in business sentiments as reflected in the forward-looking enterprise surveys conducted by the RBI as also by the other agencies, provide conducive environment for private corporates to undertake investments going forward. On the downside, global financial market volatility, protracted geopolitical tensions and geoeconomic fragmentation could dampen the investment plans,” the paper notes.