The private capital expenditure (Private Capex) growth in India remained robust in the last 5 years from FY21 to FY25E, reporting a CAGR of 19.8%, according to a report by HDFC Securities. The report highlighted that private capex growth was strong during this period, but it did not reflect in the credit growth of the banking system. This was because almost the entire capital expenditure was financed through strong cash flows from operations, reducing the need for bank credit.

It said, “private capex growth has been robust from FY21 to FY25E, reporting a CAGR of 19.8%. Private capex growth wasn’t reflected in the credit growth of the banking system, as almost the entire capex was financed by strong cash flows from operations in this period, thus limiting the need for bank credit.”

The report also added that the 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. It is further expected to rise to Rs 9,951 billion in FY25E. This growth, at a CAGR of 19.8%, was led by key sectors such as oil and gas, power, automobiles, and commodities.

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The report also noted a strong rise in central government capital expenditure during the same period. Central capex grew from Rs 4,263 billion in FY21 to Rs 10,184 billion in FY25E, marking a CAGR of 24.3%. Major contributors to this growth were ministries related to road transport, railways, defence, and capex-related transfers to states.

However, state government capital expenditure lagged behind. State capex increased from Rs 4,223 billion in FY21, but at a slower CAGR of 11.9% over FY21 to FY25E. While it grew by 28%, 11%, and 26% in the next three years, it has declined by 20% year-on-year so far in FY25E to Rs 6,075 billion (till February 2025).

States such as Uttar Pradesh, Maharashtra, Madhya Pradesh, Tamil Nadu, Gujarat, and Odisha were the main contributors to state capex growth. The report further mentioned that the top 250 private companies (excluding BFSI) spent a total of Rs 29.6 trillion in capex between FY20 and FY24, which was only about 57% of their total cash flow from operations (INR 52.7 trillion) during the same period.

This indicated that companies had enough internal resources and surplus cash to carry out their investment plans without adding to their debt burden. This also explains why there was no significant capex-led credit growth in the banking sector during this time.