Capex mood sees revival in Q3, led by private sector: CMIE data

The public sector’s appetite for fresh capex planning continued to shrink. (Image: Pixabay)
The public sector’s appetite for fresh capex planning continued to shrink. (Image: Pixabay)


  • The investment mood improved in the December quarter, but remains weak since the same quarter a year ago. Analysts see a patchy outlook for now due to the looming Lok Sabha elections, but the overall trend is optimistic.

Green shoots are emerging for the Indian economy as it enters the year 2024, with the just-ended quarter providing much-awaited signs of revival in the investment cycle. A total of 2.1 trillion worth of new projects were announced across the country in the December-ended quarter, up nearly 15% from the preceding three-month period, showed data from the project-tracking database of the Centre for Monitoring Indian Economy (CMIE).

While capital expenditure proposals were still sharply weaker than the year-ago period, when projects worth 9.5 trillion were announced, the latest figure marks a sharp turnaround after two quarters of precipitous decline. The data is provisional, and may be updated later.

In a welcome shift of trend, private companies led the way this time. The most notable private sector announcements included JSW Neo Energy’s pumped storage power project in Almora worth 15,000 crore and Welspun New Energy’s Green Ammonia manufacturing unit project worth 13,860 crore in Odisha.

“New investment proposals continue to be buoyed by expectation of policy continuity at the Centre [after the Lok Sabha polls later this year], which is the base case assumption," said Anitha Rangan, economist at Equirus. “Particularly after the recent results of state elections, this view has further cemented, which is positive for the investment cycle."

Meanwhile, the public sector’s appetite for fresh capex planning continued to shrink. Suvodeep Rakshit, senior economist, Kotak Institutional Equities, said the space for a sustained government capex thrust would be now diminishing as the Centre’s priority of fiscal consolidation was coming back into focus.

Manufacturing push

While the investment mood appeared to revive, it was not a broad-based recovery. Almost 65% of the value of the new project announcements came from manufacturing alone. This itself was up 94% sequentially, which meant the combined proposals in other segments were down 34.4%. (However, the value of capex proposals in manufacturing was also down 80% over the year-ago period.)

Projects in the inorganic chemicals space related to green ammonia and green hydrogen cornered nearly a third of the manufacturing investment plans during the December-ended quarter. These include projects announced by the Welspun group, Tata Steel and Sembcorp Green Hydrogen. “Technological shifts around the green energy theme will also result in specific capex related to the electric vehicle ecosystem, solar and wind energy," Rangan said.

The construction and real estate space saw a 59% quarter-on-quarter jump and was up over five times on a year-on-year basis. But other sectors did not follow suit: sectors such as electricity and services (this excludes financial services) fell over 20% sequentially. Projects worth around 37,000 crore and 34,000 crore were announced in these sectors, respectively, during the period.

Despite the overall growth, Rakshit warned that domestic private consumption remained on a weak footing, which along with a likely gradual slowdown in global demand, could weigh on the private investment cycle.

Completions struggle

While new proposals saw an uptick, completion of existing projects continued to falter. Around 1.2 trillion worth of projects got completed during the December quarter, which is lower than the average of 1.7 trillion worth of quarterly completions in 2023. The figure was down close to 15% after a 7% contraction in the preceding quarter, and this was the third sequential decline. The worth of projects that got completed was even lower from the year-ago period—it shrank by 34%.

Going forward, some analysts expect the near-term investment outlook to remain patchy with the 2024 election season round the corner as new project approvals could face halts or delays against the backdrop of the Lok Sabha elections. However, structural enablers remain in place: Rangan said shifts in consumption patterns, technology, and global supply chains, supported by the possibility of domestic policy continuity, favour long-term growth.

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