India's 8% growth goal at risk as private capex lags: YES Securities

YES Securities warns India's growth relies too heavily on government spending as private capital expenditure falters despite record corporate cash holdings of ₹10.35 trillion

India’s high-growth ambitions risk losing steam as private capital expenditure (capex) continues to falter despite record corporate cash reserves, YES Securities said in a report on Thursday.

 

Indian companies are sitting on ₹10.35 trillion in cash as of FY25—more than double FY19 levels—but fresh project announcements slumped in FY24–25, with most liquidity returned to shareholders instead of being deployed in new investments.

 

Companies remain cautious due to weak demand, global uncertainty, and policy unpredictability, the report noted. For India to sustain high growth, this liquidity must be channelled into productive investments.

Government-led growth

While real Gross Fixed Capital Formation (GFCF) expanded at an average of 8.1 per cent in FY23–25, above the pre-pandemic pace of 7.4 per cent, the increase has been driven almost entirely by government-led outlays under PM GatiShakti, the National Infrastructure Pipeline, and production-linked incentive (PLI) schemes.

 

 

Public capex has tripled since FY20, helping improve investment efficiency, with the Incremental Capital Output Ratio (ICOR) falling to 4.4 from 4.8 in the decade before the pandemic.

Limits of public spending

YES Securities warned, however, that history shows government spending alone cannot sustain high multipliers or long-term efficiency. During the FY05–08 capex cycle, robust private investment helped deliver GDP growth above 8 per cent with an ICOR of just 3.2–3.8, even at lower investment-to-GDP ratios.

 

If private capex revives alongside strong consumption and accommodative credit, the brokerage projects GFCF’s share of GDP could rise from 34 per cent to 35 per cent and ICOR fall further to 4.3. This would raise potential GDP growth to 8.1 per cent from the current 7.7 per cent.

Private capex: the missing piece

For now, India’s growth momentum rests heavily on government spending, leaving private investment as the missing piece in bridging its ambition for a sustained 8 per cent growth path, the report said.