Sluggish Private Capital Expenditure Poses Challenges for Indian Economy in Q4FY25

Private capital expenditure in India was weak in Q4FY25 despite a 22.7% increase in overall project announcements, driven by external economic uncertainties and sluggish domestic demand. Key sectors like Manufacturing and Services contributed to the decline, while the Electricity and Renewable Energy sector saw significant growth.

Private capital expenditure in India remained notably weak during the fourth quarter of the financial year 2024-25, as revealed in a recent Avendus Spark report. Despite a noticeable increase in overall project announcements, the private sector struggled due to various economic and geopolitical challenges.

The report underscored a year-on-year 22.7% increase in total new project announcements across both public and private sectors in Q4FY25, amounting to Rs. 18 trillion. However, private sector projects saw only a minimal 4% increase. The decline in private capex is attributed to weak domestic demand and global macroeconomic uncertainties, with notable declines in Services and Construction/Real Estate.

Sectors like Electricity and Renewable Energy showed robust growth, while key sectors such as Manufacturing and Services experienced declines in new projects. The full fiscal year saw a 9% drop in private project announcements, mainly due to weak activity in the Services sector.

China-related trade concerns and Trump-era tariffs further impacted investor sentiment, leading private firms to delay or downsize capex plans. Consequently, private project completions dropped sharply, with a 41% decline in Q4FY25. Manufacturing, Services, and Construction saw significant completion drops.

Yet, there were positive developments, as the Electricity sector recorded a 55% investment surge, and Mining saw a remarkable 732% rise. Nevertheless, private capital expenditure in India continues to combat substantial headwinds amid ongoing challenges. (ANI)

(With inputs from agencies.)