Income generation and upgradation remained the mainstay of capex intentions of nearly 80 per cent of the enterprises in FY25.
Chennai: Large private sector companies increased their capex in real terms to 2.3 per cent of GDP in FY25 after falling to a three-year low of 1.6 per cent in FY24.
With the increase in consumption demand in FY25, there has been a turnaround in terms of the proposed capex by the large private companies. Their capex had fallen to 1.6 per cent in FY24. In FY22, it stood at 2 per cent of the GDP and 2.4 per cent in FY23, finds India Ratings.
The share of large companies in the total capex spent by the private sector too has fallen in the past years. Capex incurred by large private compnaies had represented 18.9 per cent of the overall private sector capex in FY23 and this fell to 13.9 per cent in FY24. It is estimated to have further fallen to 7 per cent in FY25, indicating better capex by other private sector firms in the past two years.
Most of the capex was used by the enterprises for the purchase of new assets for FY25. Over half of the expenditure was towards new machinery and equipment signalling modernisation and capacity expansion, followed by capital work-in-progress at 22 per cent, dwellings and buildings at 9.7 per cent and intellectual property products at 5.8 per cent.
However, just 2.2 per cent and 0.3 per cent was spent on computer software and databases and research and development, respectively. This indicates low innovation intensity at a broader corporate level in India, which is quite low considering the new pace of technological changes such as AI and cloud computing.
Income generation and upgradation remained the mainstay of capex intentions of nearly 80 per cent of the enterprises in FY25. Energy transition was just 1.4 per cent is likely to grow as sustainability pressures mount. Only 4.4 per cent of the manufacturing firms were intending to spend on energy conservation, highest among all the sectors.
However, according to India Ratings, FY26 indicates a decline in capex, perhaps due to a cautious approach and uncertainty. The tariff tantrum would weigh down on total private sector investments.
