There are mounting expectations that the corporate sector will take the baton from the government for a fresh round of capital expenditure and fuel the next leg of growth, according to Reserve Bank of India’s economic researchers.

“Balance sheets are healthy on the back of high profits, with leverage remaining constant or improving and the return ratio at a multi-year high. Fixed asset growth is already evident in the oil and gas sector and in chemicals.

“In sectors such as steel and automobiles for which stock returns have exceeded index returns, fixed asset additions have, however, been underwhelming,” the researchers (RBI officials) said in an article “State of the Economy” in the central bank’s latest monthly bulletin.

Power sector

They observed that capex plans of the power sector are the most ambitious, but leverage is high among distribution companies.

Even so, India has made big strides in the green energy sector over the last decade, with renewable power constituting 43 per cent of the total installed power capacity.

The authors emphasised that corporates must seize this lever to expand capex, especially with the target of tripling renewable energy capacity to 500 GW by 2030.

Borrowing programme

The officials exhorted that overall, the corporate sector must get its act together ready to relieve the government of capex heavy lifting and take advantage of the space ceded in financial markets by a lower budgeted borrowing programme and the easing of borrowing costs that has already begun in response to the Interim Budget for 2024-25, driven as it is by capex and consolidation.

Overall, investment intentions of the private corporate sector have been positive this year so far, they said.

Total cost of projects, for which loans were sanctioned by major banks/all-India financial institutions stood at ₹2.4-lakh crore during April-December 2023, which was 23 per cent higher than that in the corresponding period last year.

Funds raised through external commercial borrowings for capex and initial public offerings remained robust during the second and third quarters of the current financial year, though their levels were lower than such resources raised during Q1 (April-June):2023-24.

RBI Governor Shaktikanta Das, in his bi-monthly monetary policy statement on February 8, observed that investment cycle is gaining steam, aided by sustained thrust on government capex; increasing capacity utilisation; rising flow of resources to the commercial sector; and policy support from schemes such as production linked incentive.

“Revival in private corporate investment is also underway. Our survey suggests that investment intentions of private corporates remain upbeat, and both services and infrastructure firms are optimistic about overall business conditions,” Das then said.