After a decade of declining investment relative to GDP, capital expenditure (capex) has now emerged as a primary growth catalyst in India, according to the brokerage's research note. Analysts believe that the capex cycle has further potential, leading to a resemblance between the ongoing expansion and that of 2003-07.
According to Morgan Stanley, the defining characteristic of the current expansion is the rise in the investment-to-GDP ratio. "In the 2003-07 cycle investment to GDP rose from 27% in F2003 (the fiscal year ending March 2003) to 39% in F2008, which was close to the peak. Investment to GDP then hovered around those levels until it peaked in F2011.
"2011 to 2021 then registered a decade of decline - but the ratio has now inflected again to 34% of GDP and we expect it to rise further to 36% of GDP in F2027E.
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