Private capex could increase to Rs 2.45 trillion in FY25, says RBI study

A study by the Reserve Bank of India (RBI) staff on Monday indicated that projected capital expenditure by private companies could rise significantly to Rs 2.45 trillion in FY25, up from Rs 1.59 trillion in FY24.

In FY24, the projects sanctioned by banks and financial institutions reached a record high of Rs 3.90 trillion, of which 54 per cent was planned to be invested by the end of FY23, 30 per cent is provided for FY25, and the remaining 16 per cent is envisaged to be invested in the subsequent years.

“The phasing profile of pipeline projects financed through all three channels suggests that the envisaged capex could increase significantly to Rs 2.45 trillion in 2024-25 (FY25) from Rs 1.59 trillion in 2023-24 (FY24),” the RBI study highlighted.

The other channels of financing include borrowing through the external commercial borrowing (ECB) route and the initial public offering (IPO) route.

According to the RBI, the infrastructure sector continued to attract the major share of envisaged capital investment, led by the ‘roads & bridges’ and ‘power’ sectors, reflecting the government’s push towards infrastructure development.

“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 well as by other agencies, provide a conducive environment for private corporates to undertake investments going forward,” the RBI staff study said.

It added that on the downside, global financial market volatility, protracted geopolitical tensions, and geo-economic fragmentation could dampen investment plans.

“Overall, the investment cycle is expected to remain upbeat, and its sustainability needs to be watched closely,” it further said.