Quite a few indicators seem to suggest the capex cycle in India has started. Bank loan growth at over 17 percent is at its highest since 2013; IIP data suggested that capital goods are growing strongly at 16.8 percent, crossing pre-COVID levels.
CMIE data shows new investment intentions in first half of this year are up 20 percent to over Rs 8 trillion. Capex bellwether company Larsen & Toubro reported a 13 percent growth in its order book to a record Rs 3.7 trillion. The central government's actual capex spend is 50 percent higher than in the first half touching Rs 3.42 trillion.
Only the state capex numbers are still subdued at about Rs 1.6 trillion as of end September but even this may pick up with the centre giving interest-free loans to the states.
So, are we at the start of a new capex cycle? Has the cycle started? To discuss this, CNBC-TV18’s Latha Venkatesh spoke to R Shankar Raman of L&T; Mridul Saggar, former MPC member and RBI Economist; and Mahesh Vyas, MD of CMIE.
Vyas said, “The important thing is that there is a very substantial increase in the number of new proposals being made and the value of new proposals being made and they are all coming from the private sector. In the last couple of quarters, we are also seeing a diversification in terms of the business groups that are making these proposals. So it is not limited to the very top and business groups only.”
Raman believes that appetite for capex is improving, because the factors that are encouraging people to look at capex are becoming more favourable. He said, “It is to the credit of the government that the series of steps that they had taken over a period of time are all sort of beginning to fall in place. The effort to improve the confidence of the industry, and they efforts to incentivize production, efforts to localize manufacturing, these are good policy measures.”
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