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India's private sector appears to be ramping up capital expenditure, garnering enthusiasm among policymakers and industry leaders. The Reserve Bank of India (RBI) has noted a positive shift in private capex outlook, attributing it to rising consumer confidence and substantial deleveraging within the corporate sector. Additionally, schemes like the production-linked incentive initiative contribute to this optimism. India Ratings and Research (Ind-Ra) suggests a potential uptick in private investment if certain economic conditions persist.
However, a closer look reveals a more nuanced reality. Recent data shows a significant decline in new project announcements by the private sector, signalling a slowdown in investments. Manufacturing, in particular, lags behind overall GDP and industry growth. Bank credit to the industry has also slowed down, indicating limited widespread capex. Corporate investments have fallen, reaching the lowest levels in a decade as a percentage of GDP.
While some sectors show improvement in capacity utilisation, the majority of private capex is concentrated in a few industries and big players. Small and mid-sized businesses face challenges due to economic uncertainties and require support. The key obstacle remains subdued consumer demand, exacerbated by decreased household financial assets and borrowing to finance consumption.
To foster sustained consumption recovery and widespread private capex, the government must address structural labour market issues and identify barriers hindering investments in various sectors. Addressing these challenges is crucial to ensuring a robust and broad-based private capex revival in the Indian economy.
Source: The Financial Express
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INDUSTRIAL PRODUCTS FINDER (IPF) is India’s only industrial product portal. Referred to as the ‘Bible’ of the manufacturing sector in India,
INDUSTRIAL PRODUCTS FINDER (IPF) is India’s only industrial product portal. Referred to as the ‘Bible’ of the manufacturing sector in India,
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