India Ratings sees muted private capex conditions to continue for two more financial years on account of weak consumption demand, global overcapacity and negative impact of Goods and Services Tax on working capital.

The private capex is expected to grow at a compounded annual growth rate of only 5-8 per cent over FY18-FY20 or by ₹1 trillion and it will be mainly in the form of maintanence capex and essential upgrades.

Any meaningful capex recovery will happen only after FY20 and will be led by the private sector, the Fitch group company said. Earlier in FY15, the rating agency predicted the recovery not happening before FY19.

Nevertheless, a complete turnaround in the investment cycle is unlikely for next 3-4 years until here is high demand visibility and significant deliberating.

India Ratings’ analysis has been based on top 200 asset heavy companies. The capex recovery will be led by 125 non-stressed corporates out of the total universe of 200, which formed 80 per cent of the total capex and had a capacity utilisation of 75-80 per cent.

Sectors like automobiles, oil and gas and telecom will be major drivers of capex.

Government spending which is the major driver of overall capex currently is unlikely to continue due to limited ability of the government to scale up spending owing to fiscal pressures, according to India Ratings.

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