Private Sector Investments in India
In September 2022, Union Finance Minister urged India Inc to expand their capacities, questioning the stagnation in private sector investments despite economic growth. Though India's GDP grew by 8.2% in a three-year span, private investments have plateaued.
Stagnant Private Capital Expenditure
- Private corporate investment has been stagnant at around 12% of GDP since 2011-12.
- Gross Fixed Capital Formation (GFCF) as a percentage of GDP is at 33.7% in 2024-25, slightly lower than early 2010s figures.
- Mixed data sources indicate variations in private capex trends.
Data Insights
- CareEdge Ratings: 11% rise in total capex of nearly 2,000 listed non-financial companies in 2024-25.
- Bank of Baroda: Gross fixed assets up 8.5% year-on-year by September 2025.
- Statistics Ministry's survey suggests a drop in investment intentions for 2025-26 due to various constraints.
Trends and Challenges
A study suggests companies are increasing financial investments rather than in physical assets post-2019 corporate tax cuts.
- Interest coverage ratio of 3,000+ companies improved, indicating better financial health.
- RBI reports manufacturing sector's capacity utilization struggles to surpass 75%, hindering investment incentives.
Barriers to Investment
- Challenges include high raw material costs, interest rates, and non-tariff barriers.
- Limited access to advanced machinery, high land prices, and competitive pressures also hinder investment.
Despite a fall in interest rates in 2025, other challenges persist, affecting private sector's decision to expand production capacity.
