Corporate investments grew 11 percent year-on-year in FY23, while their share fell to 42.2 percent of total investments, the lowest in 19 years. Corporate investments fell to 12.6 percent of GDP in FY23
The companies are also possibly waiting for further clarity in the economic policies and business environment before loosening their purse strings as the country is likely to go to polls in May 2024. Image: Anindito Mukherjee/Bloomberg via Getty Images
Even as the perils of a pandemic are gradually ebbing off, companies are yet to fire up their spends in expansion plans. Perhaps lack of growth opportunities or simply limited supply of funds could be the reasons for slow corporate capex in India. The companies are also possibly waiting for further clarity in the economic policies and business environment before loosening their purse strings as the country is likely to go to polls in May 2024.
“Given that elections are likely in 2024, companies will be discreet. Expectations of rates coming down will also defer their plans of investments. Governments at both Centre and states are expected to meet their capex targets and hence sustain backward linkages,” says Madan Sabnavis, chief economist, Bank of Baroda.
For the year ending March 2023, corporate investment was the lowest in 19 years. Corporate investments grew 11 percent year-on-year in FY23, while its share fell to 42.2 percent of total investments, the lowest in 19 years, according to data analysis by Motilal Oswal Financial Services. The analysis is based on data covering 13 monthly and six quarterly indicators across 27 states.
Total investments were at 31 percent of GDP in FY23, almost similar to FY22 and the pre-Covid period in FY20, the analysis showed. In FY22, total investment was 31.2 percent of GDP, as against 28.8 percent in FY21 and 30.1 percent of GDP in FY20. Although India’s investment rate was broadly unchanged last year, corporate investments fell to 12.6 percent of GDP in FY23, the lowest since FY04.
Government investments grew 14.5 percent YoY in FY23, implying an average growth of 14 percent in the last four years (FY20- FY23). This is slightly better than 13 percent average growth in the previous four years (FY16-FY19). It stood at 4.5 percent of GDP in FY23, the same as in FY22, equally split between the Centre and the states.