Modest recovery in central capital expenditure in Q2FY25, states and corporate capex expenditure continued to decline: CareEdge Ratings

Mumbai (Maharashtra) [India], November 14 : In the second quarter, India saw a modest recovery in capital expenditure (Capex), largely driven by a 10.3 per cent year-on-year increase in central government spending, according to CareEdge Ratings report.
Though state-level spending continued to decline, dropping by 3.8 per cent compared to last year, a few states, including Punjab, Assam, Karnataka, Maharashtra, and Rajasthan, showcased resilience by recording double-digit growth in Capex during the first half of the year, highlighting regions of sustained investment momentum despite the broader slowdown.
On the corporate side, the capex for a sample of 1,074 non-financial listed companies totalled Rs 9.4 trillion in FY24, showing a minor reduction from the previous year.
The report also highlighted that, Capex by the central government and major states have been subdued on a year-on-year (YoY) basis, with central capex contracting by 15.4 per cent and state capex decreasing by 10.5 per cent.
Rajani Sinha, Chief Economist at CareEdge Ratings says going forward Capex of the centre and corporate will go up. The subdued capex was mainly because of factors like election-related restrictions, global uncertainties, softer domestic demand, Chinese oversupply, and higher borrowing costs.
"Looking ahead, there remains potential for recovery in public capex during the remainder of the fiscal year. On the private capex front, there is encouraging order book scenario of the capital goods and infrastructure sector and this could be indicative of likely pick up in capex in other sectors going forward." Sinha said,
She added, "Furthermore, with deleveraged corporate balance sheets, the conditions seem favourable for an upturn in the private capex cycle."
CareEdge Ratings forecasts a compound annual growth rate (CAGR) of 13 per cent for capex in the power generation sector from FY25 to FY28, driven by both listed and unlisted companies.
Solar and wind energy segments within this sector are expected to grow at a CAGR of 10.7 per cent and 16.4 per cent, respectively, underscoring a strong commitment to renewable energy.
An analysis of order books in the capital goods sector revealed a sharp increase of 23.6 per cent in FY24, contrasting with a CAGR of just 4.5 per cent over the preceding four years.
Investment announcements fell by 29.5 per cent YoY in H1 FY25, with completed projects down by 53 per cent YoY. Q1's low activity reflected the impact of election-related restrictions, though Q2 saw a gradual improvement. Nonetheless, both investment announcements and completions remain below the half-yearly averages seen over the past decade.
In H1 FY25, the manufacturing sector drove 45 per cent of new investment announcements, with transport (auto and ancillary) and chemicals segments holding a 25 per cent share each.
Meanwhile, non-financial services led completed projects with a 43 per cent share, dominated by road transport services, although new project announcements in this sector remained lower, at 18 per cent.