5 December 2024
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CO
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COPE
The Economy Observer
Capex Tracker: Corporate investments grow very slowly in FY24
Government and household capex healthy
After growing strongly in the past two quarters (4QFY24 and 1QFY25), our estimates suggest that corporate investments
weakened once again in 2QFY25. In contrast, government investments (center + states) picked up in 2Q after falling in
1Q, though household investments continued to grow decently. In 1HFY25, thus, while government investments declined
12.6% YoY (vs +33.8% in 1HFY24), corporate investments were up 10% YoY (vs -1.4%) and household investments rose
12.2% (vs +17.6%). This regular
update
is intended to track India’s capex trends and key drivers.
Government investments grew 4.9% YoY in 2QFY25, implying that it shrank 12.6% YoY in 1HFY25. The center’s capex
grew 15% YoY in 2QFY25, implying a fall of 13.4% YoY in 1HFY25, while states’ capex declined for the second consecutive
quarter in 2QFY25, leading to a fall of 11.5% YoY in 1HFY25. Compared to its peak of 5.1% of GDP in FY24, fiscal
investments were down to 3.9% of GDP in 1HFY25, led by a sharper fall in states’ capex (at 1.6% of GDP) and moderation
in the center’s capex (to 2.3% of GDP).
Accordingly, the government sector accounted for 12.3% of total investments in 1HFY25, similar to the pre-pandemic
years but lower than the average of 14.6% in the past four years (FY21-FY24). This also indicates that private investments
grew only 11.1% YoY in 1HFY25 vs. 7.4% in FY24 and an average of 9.7% during FY20-24.
Using data on stamp duty and registration fees collected by states, our estimates suggest that household investment
(primarily residential real estate) grew 12.2% YoY in 1HFY25, following 10.7% growth in FY24. This means that the
household sector accounted for ~44% of India’s total investments in 1HFY25, the highest since FY04.
Lastly, as a residual, we find that corporate investments (including PSEs) picked up and reported 10% YoY growth in
1HFY25, following a fall of 1.4% in 1HFY24 (and a growth of 4.3% in FY24). The share of the corporate sector, thus, inched
up ~44% in 1HFY25, compared to its two-decade low of 42.2% in FY24.
Overall, investment growth weakened in 1HFY25, primarily led by the government. On the other hand, household
investments grew decently but weaker than in the recent past. Corporate investments grew decently in 1QFY25, though
they moderated in 2QFY25. As fiscal investments pick up in 2HFY25, it would be interesting to note if the corporate and
household sectors continue to grow their investments.
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For the first time in two years, India’s real investments (including fixed investments,
changes in inventories, and valuables) grew slower than the total consumption
(private + government) in 2QFY25. After growing 9.4% in FY24, real investments
increased 6.5% YoY in 1HFY25, with only 5.9% growth in 2Q. Further, nominal
investments were broadly unchanged at ~34% of GDP in 1HFY25 vs 1HFY24, but
better than ~31% in the pre-pandemic years
(Exhibit 1).
Exhibit 2: Corporate sector’s share slid in FY24, while that of
the government picked up
Sectoral investments#
(% of total)
5.2
5.4
5.2
5.9
39.7
Corporate
5.5
6.4
37.4
Household
4.8
7.7
39.5
Center
6.0
9.1
42.0
States
Exhibit 1: India’s investment rate was broadly unchanged at
~34% of GDP in 1HFY25
Total investments* (% of GDP)
35.7
32.6
30.9
30.9
32.0
30.8
32.6
33.6 33.9 33.8
4.5
6.9
32.7
5.0
7.3
43.8
39.1
26.0
50.4
49.2
55.9
50.7
48.1
42.9
43.9
1HFY15
1HFY17
1HFY19
1HFY21
1HFY23
1HFY25
1HFY19 1HFY20 1HFY21 1HFY22 1HFY23 1HFY24 1HFY25
# GFCF + Change in inventories
MOFSL estimates
Source: Various national sources, CEIC, MOFSL
* GFCF + Change in inventories + Valuables
Nikhil Gupta
– Research analyst
(Nikhil.Gupta@MotilalOswal.com)
Tanisha Ladha
– Research analyst
(Tanisha.Ladha@MotilalOswal.com)
Investors are advised to refer through important disclosures made at the last page of the Research Report.
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