Active Stocks
Wed Apr 24 2024 15:59:54
  1. Tata Steel share price
  2. 165.50 2.73%
  1. NTPC share price
  2. 351.25 1.25%
  1. Power Grid Corporation Of India share price
  2. 290.00 1.75%
  1. Infosys share price
  2. 1,431.85 -0.68%
  1. ITC share price
  2. 428.85 -0.08%
Business News/ Economy / High time India Inc picks up the baton to further capex: RBI bulletin
BackBack

High time India Inc picks up the baton to further capex: RBI bulletin

Private companies must fuel the next round of economic growth rather than leave it to the government to spend on capital expenditure, RBI officials say in the regulator’s February bulletin

Private companies must leverage the government’s recent decision to lower the market borrowing target in FY25 to their advantage, RBI officials said in the bulletin. (Mint)Premium
Private companies must leverage the government’s recent decision to lower the market borrowing target in FY25 to their advantage, RBI officials said in the bulletin. (Mint)

MUMBAI : Reserve Bank of India officials have exhorted private companies to lead the way in expanding capital expenditure, a space dominated by the government.

The corporate sector must “get its act together" and relieve the government of capex heavy-lifting, the officials say in RBI’s February bulletin, reflecting a view expressed by industry experts as well.

“Expectations for a fresh round of capex by the corporate sector to take the baton from the government and fuel the next leg of growth are mounting," the RBI officials said in the article titled ‘State of the Economy’.

India’s economy continues to sustain the momentum achieved in the first half of 2023-24, and the likelihood of the global economy exhibiting stronger-than-expected growth has brightened, the officials added.

While the article was written by RBI officials, it had the usual disclaimer that the views were those of the authors and not of the central bank.

Private companies must leverage the government’s recent decision to lower the market borrowing target in the coming fiscal year to their advantage, they said.

The advantage refers to the increased space for companies to borrow from the market owing to lower availability of sovereign debt papers. RBI governor Shaktikanta Das too recently pointed out that lower borrowing by the Centre would mean more credit being available to the private sector for their investments.

Finance minister Nirmala Sitharaman announced in the Union government’s interim budget for FY25 that the Centre would borrow 14.13 trillion from the market on a gross basis, as against an estimate of 15.43 trillion in the current financial year.

The RBI article also said that while the oil and gas and chemicals sectors recorded growth in fixed assets, in sectors such as steel and automobiles fixed asset additions were underwhelming.

“Capex plans of the power sector are the most ambitious, but leverage is high among distribution companies," it added.

In terms of green energy, India has made big strides over the last decade, with renewable power now accounting for 43% of the country’s total installed electricity capacity, the RBI article said. 

Companies must use this opportunity to expand capex, aligning with the government’s target of tripling renewable energy capacity to 500 gigawatts by 2030.

While industry experts have been pointing out that the investment cycle is being led by government capital expenditure, there seems to be some pickup recently.

Mint reported on 1 January that new projects worth 2.1 trillion were announced in the three months to December, up 15% from the September quarter, as per data from the Centre for Monitoring Indian Economy.

Unlock a world of Benefits! From insightful newsletters to real-time stock tracking, breaking news and a personalized newsfeed – it's all here, just a click away! Login Now!

ABOUT THE AUTHOR
Shayan Ghosh
Shayan Ghosh is a national editor at Mint reporting on traditional banks and shadow banks. He has over 12 years of experience in financial journalism. Based in Mint’s Mumbai bureau since 2018, he tracks interest rate movements and its impact on companies and the broader economy. His interests also include the distressed debt market, especially as India’s bankruptcy law attempts recoveries of billions worth of toxic assets.
Catch all the Business News, Market News, Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.
More Less
Published: 20 Feb 2024, 06:42 PM IST
Next Story footLogo
Recommended For You