India is seeing a pick up in private capex (capital expenditure) investments, which crossed ₹3-lakh crore in H1 FY23, said Chief Economic Advisor, V Anantha Nageswaran.

“The private sector capex in the first half has crossed ₹3 trillion and if the pace continues, we should be looking at ₹6 trillion rupees [for this year],” he said at the SBI Banking and Economics Conclave on Thursday, adding that would be the highest in the last 6-7 years.

“Are there prospects for the capex cycle in the medium term? The answer is yes,” he said, adding that due to deleveraging of corporate and bank balance sheets, capacity utilisation is also now reaching the levels which in the past have triggered capacity expansion or capex.

Growth outlook

Even as private capex is improving after several years, India must be cautious about its export outlook and concentrate on the internal drivers of demand.

“Internal drivers of demand are looking constructive and positive, resilient. Reinvigorated investment cycle, strengthened financial system, and structural reforms are paving the way for medium term growth to continue,” he said.

GDP projections of 6.5-7 per cent for FY23 appear to be reasonable at this point, Nageswaran said, adding that FY24 projections from international agencies are converging around 6.0-6.2 per cent and growth for the remainder of the decade could be close to 6.5 per cent.

Rate tightening

While there is an uneasy truce or pause in global uncertainty right now, the possibility of monetary tightening for longer-than-expected cannot be ruled out, said Nageswarana.

However, the Indian rupee has been one of the better performers, the country’s import cover remains comfortable, and international agencies do not perceive India’s high CAD (current account deficit) to be an area of concern at the moment, he said, adding that CAD could rise to 3-3.2 per cent of the GDP.

“Volume growth [for banks] is pretty strong and interest rates for lenders are not very constrictive. So, we maybe entering a fairly comfortable Goldilocks zone in terms of the interest rates charged to borrowers and rates paid on deposits. So, credit growth momentum is holding up quite well,” he said.

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