New Delhi [India], October 15 : Private capital expenditure in India is likely to remain subdued in FY27 despite strong economic growth, leaving government spending and sectors such as energy transition and automation to drive investment, as per a report by Systematix Institutional Equities.
The report highlighted that private investment has failed to sustain its post-pandemic recovery despite several government measures aimed at encouraging companies to expand production capacity and increase spending.
However, “After peaking at Rs 2.6 billion per enterprise in FY23, private capex has fallen 38% to a provisional Rs 1.6 billion in FY26, with intended spending for FY27 showing no improvement,” the report said. 
According to a capital expenditure (capex) survey conducted by Systematix, “Overall, private capex per enterprise across 17 industries declined from Rs 1.8 billion in FY22 to Rs 1.6 billion in FY25 and remained unchanged in FY26.”
The report noted that private investment witnessed a strong recovery after the pandemic, but provisional spending for FY26 and planned investment for FY27 stand at Rs 1.6 billion each, significantly below the levels recorded during the recovery period.
“The post-pandemic surge in private investment now appears less a durable capex upcycle and more a cyclical rebound from the extraordinary contraction of the pandemic years,” it said. 
The slowdown comes despite several government initiatives over the past decade to boost private investment, strengthen domestic manufacturing and revive capital expenditure.
Over the past decade, the government has introduced several measures to boost private investment, strengthen domestic manufacturing and revive capital expenditure, including higher government spending on infrastructure to encourage private investment, Production-Linked Incentive (PLI) schemes, easing foreign direct investment (FDI) rules and signing Free Trade Agreements (FTAs) to strengthen India's participation in global supply chains. 
Additionally, the government introduced major corporate tax reforms in 2019, reducing effective tax rates to around 25.17 per cent for existing domestic companies and 17.01 per cent for new manufacturing firms. Companies opting for these lower tax rates were also exempted from the Minimum Alternate Tax (MAT).
These efforts were accompanied by monetary easing measures by the Reserve Bank of India (RBI) and improvements in corporate balance sheets.
The report further identified weak household demand and savings as major factors holding back private investment, as companies remain reluctant to expand production capacity without stronger consumer demand.
It stressed, “corporate investment ultimately relies on robust aggregate demand, squeezing household purchasing power while expecting private enterprises to build new capacities resulted in a persistent structural deadlock.
As a result, firms preferred utilizing cash flows for cost optimization, debt servicing, and automation rather than Greenfield capacity expansion.” 
Overall, “Unless demand conditions strengthen meaningfully and capacity utilization rises decisively, private capex is likely to remain a laggard, leaving public expenditure and a limited set of themes such as energy transition and automation to shoulder the burden of capital formation and growth,” it said.