India's Private Capex Growth: A Robust 19.8% CAGR Over Five Years

The private capital expenditure in India has shown a remarkable compound annual growth rate (CAGR) of 19.8% from FY21 to FY25E, driven by key sectors such as oil and gas, power, automobiles, and commodities, according to a report by HDFC Securities.

Why Credit Growth Remained Unaffected

Interestingly, this surge in private capex did not translate into higher credit growth for the banking system. The reason? Most of the capital expenditure was financed through strong internal cash flows from operations, reducing reliance on bank credit.

Central vs. State Government Capex: A Tale of Two Growth Rates

While the central government's capital expenditure saw a significant rise, with a CAGR of 24.3% from FY21 to FY25E, state government capex lagged, growing at a slower rate of 11.9% over the same period.

Looking Ahead

The report anticipates continued growth in private sector capex, with expectations set for a rise to Rs 9,951 billion in FY25E. Meanwhile, state capex has seen a decline of 20% year-on-year in FY25E, highlighting disparities in investment trends across different levels of government.