India Inc expects private capex to gain further momentum in the short to medium term, as it sees green shoots of revival in sectors like real estate, construction, logistics and chemicals, among others.
Speaking at the CII Global Economic Policy Summit 2022, top executives of corporate India commended the government on investments in public infrastructure. However, they highlighted that there are a number of sectors where there is an issue of excess capacity leading to tepid capital expenditure.
“We should give credit to the government for their continuous investment on the public infrastructure that is what has helped us in the last few years. In the private sector, we are beginning to see in the last few quarters. However, there are still many sectors where there is excess capacity. Obviously private capital does have to earn a particular return to justify that investment and capital. So, it is a more short to medium term window that we are looking at for private capital to come back,” said Sanjiv Bajaj, chairman and managing director, Bajaj Finserv and president, CII.
Sanjiv Puri, chairman and managing director, ITC and vice president, CII said that while the macros for investment are pretty good in terms of visibility of funds, better corporate balance sheets and even the earnings are on a better trajectory but capacity utilisation is an issue. “While this is also picking up, there is a serious amount of global uncertainty, and there are serious headwinds on exports, which will dampen sentiment,” he said.
However, he added that for companies like ITC, which are domestic focused, private capex continues. “We have already done, and some more is in the pipeline. So, for domestic oriented (investments), I think it is an ongoing process, and it is happening,” he added.
Baba Kalyani, chairman and managing director, Bharat Forge, said that India must move fast to emerge from a factor driven economy to an innovation led economy, and stressed on innovation in manufacturing. “There are pockets of opportunities in select areas such as railways which India is leveraging to move ahead. We should change from traditionally being a country of traders to that of manufacturer like in China. This will require investment and capital,” he said.
Uday Kotak, managing director and CEO, Kotak Mahindra Bank and chairman, CII Global Economic Policy Summit 2022 highlighted that to develop world class Indian companies, there is a need to build scale in manufacturing, based on cutting edge product innovation and developing IP rights rather than depending on arbitrage alone to secure an advantage.
During the discussion, he also mentioned that the interest rate trajectory in India would depend more on the signals provided by the US Fed.
Janmejaya Sinha, chairman, Boston Consulting Group India said that there were several issues that need to be addressed on water, power, health and education. “There is a huge potential for the care economy. We should seize the opportunity to emerge as the caretakers of the world,” he said.