Private capital expenditure (capex) growth in India has remained strong over the last five years, from FY21 to FY25E, with a compound annual growth rate (CAGR) of 19.8%, according to a report by HDFC Securities. The report pointed out that while private capex showed impressive growth during this period, it did not result in corresponding credit growth in the banking system. This was because nearly all of the capital expenditure was funded through robust operational cash flows, reducing the need for bank credit.
The report stated, “Private capex growth has been robust from FY21 to FY25E, registering a CAGR of 19.8%. However, this growth wasn’t mirrored in the banking system’s credit growth, as the majority of the capex was financed by strong operational cash flows, thereby limiting the reliance on bank credit.”
Capital expenditure by the top 250 listed private companies increased significantly from Rs 4,833 billion in FY21 to Rs 8,426 billion in FY24, with a projected rise to Rs 9,951 billion by FY25E. This growth was driven by key sectors such as oil and gas, power, automobiles, and commodities.
In addition, the report highlighted a notable increase in central government capital expenditure during the same period. Central capex rose from Rs 4,263 billion in FY21 to Rs 10,184 billion in FY25E, reflecting a CAGR of 24.3%. Key contributors to this growth included ministries responsible for road transport, railways, defense, and transfers for state capex.
However, state government capital expenditure lagged behind. State capex grew from Rs 4,223 billion in FY21 but at a slower CAGR of 11.9% over the FY21 to FY25E period. While state capex showed increases of 28%, 11%, and 26% in the following years, it declined by 20% year-on-year in FY25E, with Rs 6,075 billion spent as of February 2025. The states of Uttar Pradesh, Maharashtra, Madhya Pradesh, Tamil Nadu, Gujarat, and Odisha were the primary contributors to this growth.
The report also noted that the top 250 private companies (excluding BFSI) spent a total of Rs 29.6 trillion on capital expenditure between FY20 and FY24, which accounted for about 57% of their total cash flow from operations (Rs 52.7 trillion) during the same period. This suggests that these companies had sufficient internal resources and surplus cash to fund their investments without incurring additional debt. This also explains the absence of significant capex-driven credit growth in the banking sector during this time.
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