Animal Spirits Revival: Will Private Capex Roar?

An RBI report points to economic conditions being in place for a private capex revival. But we have seen many stirrings that flattered only to deceive. This time, let's hope it plays out

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India’s wait for a revival in private capital expenditure has proven inordinately long. In this context, the Reserve Bank of India’s (RBI) latest State of the Economy report strikes an optimistic note. "Expectations for a fresh round of capex by the corporate sector to take the baton from the government and fuel the next leg of growth are mounting," it notes. Its choice of words suggests an overhang of uncertainty. After all, past hopes have been deflated too often. So all optimism on this count must be laced with caution. That said, conditions are indeed supportive, with our post-pandemic economy on the verge of marking three dots on a trot of about 7% annual expansion (adjusted for inflation), despite global headwinds. Corporate balance sheets are strong, as are those of banks. Further, inflation has eased, and should RBI feel assured of pinning it down at 4% or so, the "bedrock" for sustained economic growth would begin to materialize that Governor Shaktikanta Das referred to in his last policy speech. If RBI succeeds, we could look forward to a drop in duration-risk premia and stru