India's Booming Private Capex: A Surge Without Banking Dependency

Private capital expenditure in India saw robust growth from FY21 to FY25E with a CAGR of 19.8%, primarily funded by internal cash flows rather than bank credit. Key sectors driving this expansion include oil, gas, and power. State government capex, however, grew at a slower pace of 11.9% CAGR.

Private capital expenditure in India has experienced substantial growth over the last five years, from FY21 to the estimated FY25, as reported by HDFC Securities. The sector achieved a compound annual growth rate (CAGR) of 19.8%, though this increase wasn't mirrored in the banking system's credit growth due to companies largely financing through operational cash flows.

The capex surge was led by private companies, with expenditures climbing from Rs 4,833 billion in FY21 to Rs 8,426 billion in FY24, and further projected to reach Rs 9,951 billion in FY25. Oil and gas, power, automobiles, and commodities were key contributors. During this period, central government spending also rose significantly, from Rs 4,263 billion to Rs 10,184 billion, driven by sectors like road transport, railways, and defence.

In contrast, state government expenditures grew at a slower CAGR of 11.9%, despite a temporary rise. States such as Uttar Pradesh and Maharashtra were pivotal in supporting this growth. Notably, the top 250 private firms invested Rs 29.6 trillion in capex, leveraging ample cash flows for funding without significantly increasing their debt burden.

(With inputs from agencies.)