Private capex in India grows at 19.8% CAGR; credit growth remains same: Reports

NEW DELHI: The private capital expenditure growth in India reported a CAGR of 19.8 per cent in the last five years from FY21 to FY25E.

This growth was led by key sectors such as oil and gas, power, automobiles, and commodities, said news agency ANI as per a report by HDFC Securities.

The report noted that while private capex growth was robust during this period, it did not result in higher credit growth for the banking system. This was due to the fact that most of the capital expenditure was funded by strong cash flows from operations, reducing the need for bank credit.

It said "private capex growth has been robust from FY21 to FY25E, reporting a CAGR of 19.8 per cent.... Private capex growth wasn't reflected in the credit growth of the banking system as almost entire capex was financed by strong cash flows from operations in this period, thus limiting the need for bank credit".

The report further noted that the top 250 private companies (excluding BFSI) incurred a total capital expenditure of Rs 29.6 trillion between FY20 and FY24, which amounted to only around 57% of their total cash flow of Rs 52.7 trillion during the same period.

This suggests that companies had sufficient internal resources and surplus cash to fund their investment plans without increasing their debt. It also explains the absence of significant capex-driven credit growth in the banking sector during this period.

The report also said that capital expenditure by the top 250 listed private companies saw a substantial rise, increasing from Rs 4,833 billion in FY21 to Rs 8,426 billion in FY24. It is further expected to rise to Rs 9,951 billion in FY25E.

There was also a sharp increase in the capital expenditure of the central government as well over the same period. Central capex rose from Rs 4,263 billion in FY21 to an estimated Rs 10,184 billion in FY25, reflecting a CAGR of 24.3%. Major contributors being the ministries related to road transport, railways, defence, and capex-related transfers to states.

However, the state government capital expenditure lagged behind. While state capex rose from Rs 4,223 billion in FY21, the CAGR grw at a slower rate of 11.9% from FY21 to FY25E.

While it grew by 28% , 11%, and 26% in the next three years, it has declined by 20 per cent year-on-year so far in FY25E to Rs 6,075 billion (till February 2025).

Uttar Pradesh, Maharashtra, Madhya Pradesh, Tamil Nadu, Gujarat, and Odisha were the main contributors to the state capex growth.