Private Capex to Surge 54% in FY25: RBI

Mumbai, Aug 19 (PTI) The private capital expenditure is likely to jump 54 per cent to Rs 2.45 lakh crore from Rs 1.59 lakh crore in FY24, a paper by the Reserve Bank of India (RBI) staffers said on Monday.

The estimate has been arrived at after analysing investment intentions of private corporates based on the projects sanctioned by banks or financial institutions (FIs) during FY24, the paper by Kamal Gupta, Rajesh Kavediya and others, said.

"The phasing profile of the pipeline projects finance suggests that the envisaged capex will increase significantly to Rs 2.45 lakh crore in 2024-25 from Rs 1.59 lakh crore in 2023-24," the paper, which does not represent the central bank's views, said.

"The investment cycle is expected to remain upbeat and its sustainability needs to be watched closely," it added.

Rising domestic demand, higher capacity utilisation, improved profitability, sustained credit demands, business optimism and the government's infrastructure development thrust bode well for private capex, the paper said.

The analysis is based on a study that focused exclusively on projects costing over Rs 10 crore, and majority owned by private corporates.

The estimates could differ from the actual private corporate fixed investment data provided in national accounts on modifications in terms of their planned amount and timing, shift in funding to other sources and some shelving as well, the paper said.

In the last few years, watchers have been saying that investments are being led by government or state-run entities, and the private sector has taken a back seat.

The paper said private sector investments are a major driver of India's long-term growth.

"Infrastructure sector continued to attract the major share of envisaged capital investment, led by 'Roads & Bridges' and 'Power' sectors, reflecting the government push towards infrastructure development," it said.

In FY24, 944 projects got assistance from banks/FIs with a record high total cost of projects of Rs 3,90,978 crore, as compared to 547 projects sanctioned in FY23 having a total cost of Rs 2,66,546 crore.

As many as 438 companies raised Rs 1.68 lakh crore through external commercial borrowing for capex purpose while 123 entities raised RS 6,310 crore through domestic equity issuances under the initial public offering (IPO) route for funding their capex needs.

Investment plans of 1,505 projects were made during FY24, with record investment intentions of Rs 5.65 lakh crore, as against 982 projects in FY23 with investment intentions of Rs 3.51 lakh crore.

The intentions in FY24 included 11 mega projects having a cost of over Rs 5,000 crore each, 77 large ones of over Rs 1,000 crore, the paper said, adding that 89 per cent of proposals were greenfield or new projects.

The top five states of Gujarat, Maharashtra, Karnataka, Andhra Pradesh, and Uttar Pradesh together accounted for about 55 per cent of the total cost of projects sanctioned during FY24.