Private capex picked up in FY24, driving growth: Economic Survey FY24

Private gross fixed capital formation must accelerate in machinery, equipment, intellectual property products to create quality jobs

The 2023-24 Economic Survey has reported an increase in capital expenditure by private companies for the financial year ended March 2024 compared to FY23. The survey highlighted that gross fixed capital formation (GFCF) is becoming a key driver of growth, evidenced by its growing share of nominal GDP.

“India is in the midst of a private capex upcycle that has been aided by government capital expenditure,” the survey noted. According to the National Accounts Statistics 2024, released by the Ministry of Statistics and Programme Implementation (MoSPI), “GFCF by private non-financial corporations increased by 19.8 per cent in FY23. There are early signs that the momentum in private capital formation has been sustained in FY24,” it said, citing data from Axis Bank Research which showed 19.8% growth in private investments across 3,200 listed and unlisted non-financial firms in FY24.

Despite this, the survey observed that credit offtake by large industries is growing at a slower but stable pace. “These larger industries seem to be tapping the corporate bond market. Corporate bond issuances in FY24 were up by 70.5 per cent, with private placement remaining the preferred channel for corporates. Outstanding corporate bonds were up by 9.6 per cent (Y-o-Y) as of the end of March 2024,” it noted.

The Economic Survey further stressed that India’s private gross fixed capital formation must accelerate in machinery & equipment and intellectual property products so that quality jobs can be created.  “The focus of the government should be on creating an enabling policy and regulatory environment for the upgrade of capacity and know-how of component manufacturers, increasing the availability of trained human resources, addressing resource bottlenecks and regulatory impediments, etc.”

Capital formation in the private sector, after the consolidation in the second decade due to balance sheet issues, has started to recover after the Covid pandemic, it said, adding, “Nonetheless, there is significant scope for boosting India’s private investment, especially in the context of investment requirements facing the Indian economy in the areas of infrastructure and green transition.”

The government has taken significant initiatives like Aatmanirbhar packages, the introduction of the production-linked incentive (PLI) schemes, investment opportunities under the National Infrastructure Pipeline (NIP), the Survey further noted.