At a time the private sector is reluctant to invest in fresh capacity, the Centre’s capital expenditure too isn’t anything to write home about, reports Saikat Neogi in New Delhi.
At a time the private sector is reluctant to invest in fresh capacity, the Centre’s capital expenditure too isn’t anything to write home about, reports Saikat Neogi in New Delhi. It is early days, but capex between April and July actually fell 17% year-on-year. The silver lining is that states are spending more; capex for a clutch of 16% states jumped a sharp 46.5% y-o-y, an analysis by Religare Research shows. These states account for 60% of the total outlay and nearly 70% of the country’s GDP.
But given the private sector typically invests 40% of the total capex in the country, it’s important corporates start adding capacity. However, data from the Reserve Bank of India, based on the investment intentions of private sector companies, indicate just R67,400 crore could be put to work in in FY17.
That’s down sharply from the R1,51,200 crore in the last fiscal. In fact, envisaged private capex has been falling each year since FY12. Data from the Central Statistical Organisation shows gross fixed capital formation, an indicator of new capacity additions by companies, contracted 3.1% year-on-year in Q1FY17, the second successive quarter fall. At 26.6% of GDP in April-June 2016 and 29.4% in January-March 2016, capital formation was the lowest ever (base year 2004-05 and 2011-12).