The private capital expenditure (capex) growth in India remained robust over the last five years, from FY21 to FY25E, reporting a compound annual growth rate (CAGR) of 19.8 per cent, according to a report by HDFC Securities. The report highlighted that while private capex growth was strong during this period, it did not reflect in the credit growth of the banking system. This was because almost the entire capital expenditure was financed through strong cash flows from operations, reducing the need for bank credit.
The report stated: “Private capex growth has been robust from FY21 to FY25E, reporting a CAGR of 19.8 per cent… Private capex growth wasn’t reflected in the credit growth of the banking system as almost the entire capex was financed by strong cash flows from operations during this period, thus limiting the need for bank credit.”
The report further added that capital expenditure by the top 250 listed private companies increased significantly from ₹4,833 billion in FY21 to ₹8,426 billion in FY24. It is further expected to rise to ₹9,951 billion in FY25E. This growth, at a CAGR of 19.8 per cent, was driven by key sectors such as oil and gas, power, automobiles, and commodities.
The report also noted a strong rise in central government capital expenditure during the same period. Central capex grew from ₹4,263 billion in FY21 to ₹10,184 billion in FY25E, marking a CAGR of 24.3 per cent. Major contributors to this growth were ministries related to road transport, railways, defence, and capex-related transfers to states.
However, state government capital expenditure lagged behind. State capex increased from ₹4,223 billion in FY21 but at a slower CAGR of 11.9 per cent over FY21 to FY25E. While it grew by 28 per cent, 11 per cent, and 26 per cent in the following three years, it declined by 20 per cent year-on-year so far in FY25E, reaching ₹6,075 billion (till February 2025).
States such as Uttar Pradesh, Maharashtra, Madhya Pradesh, Tamil Nadu, Gujarat, and Odisha were the main contributors to state capex growth.
The report further mentioned that the top 250 private companies (excluding BFSI) spent a total of ₹29.6 trillion on capex between FY20 and FY24, which was only about 57 per cent of their total cash flow from operations (₹52.7 trillion) during the same period. This indicated that companies had sufficient internal resources and surplus cash to carry out their investment plans without adding to their debt burden.
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