Economists divided on revival of private capex

THE MUCH-CONTESTED question of whether a private investment cycle has commenced and is becoming broad-based still has economists divided.

- PRIYANSH VERMA

The private sector is witnessing"record profits" and so, should feel comfortable in making investments in the economy, Sanjeev Sanyal, member, Prime Minister's Economic Advisory Council, told FE, while adding that there is adequate evidence that corporate investment is "gathering steam".

Former chief statistician of India Pronab Sen noted that if the overall consumption growth is "lacklustre", companies wouldn't be willing to invest, even if the government increases capital expenditure allocation in the Budget.

Sakshi Gupta, principal economist, HDFC Bank, said that in the next six months, given the slowdown in consumption, it seems difficult that private capex would kick in. "We're in a situation of uncertainty. Private capex is not yet broad-based and is concentrated only in a few sectors such as infrastructure," she said.

As per data till February 1, about 147 listed companies posted a 34% year-on-year rise in their profit after tax (PAT) in Q3FY24, much higher than the market expectation of 28%, Motilal Oswal Financial Services said.

Sanyal's comments hold significance at a time when the industry is sceptical of increasing their capital expenditure in the backdrop of tepid private consumption growth, primarily in the rural areas.