India Inc awaits demand uptick to go on capex spree

Chief executive officers (CEOs) across sectors have expressed intentions to expand capacities, expecting the government's target to invest a record ₹11.11 trillion on infrastructure development will act as a catalyst for a jump in consumer demand.

- DEV CHATTERJEE, AMRITHA PILLAY & ISHITA AYAN DUTT

"With the government planning a capex of ₹11.11 trillion, private sector investment will come in a big way. Companies will be preparing for it right from today," HM Bangur, chairman of Shree Cement, told Business Standard.

For the past few years, the investment scene in India has been dominated by government capital expenditures; private investments in the manufacturing sector have remained muted. Weak domestic consumption, tepid external demand, and a flood of cheap Chinese imports have made Indian companies cautious about expanding manufacturing capacities.

The 2023-24 Economic Survey, presented in Parliament on Monday, highlighted that despite rising profits, Indian companies have been reluctant to invest in new manufacturing capacities or intellectual property products.

CEOs emphasise that expanding manufacturing capacity hinges on demand. "Suppose I expand capacity and there is no demand, I will be wastJOUILE. CIIL ing money. We are accountable for capital given by shareholders, and we have to give them a return. Manufacturing is really driven by demand and GDP growth," argued Ashank Desai, managing director of Mastek, an IT firm.

R Shankar Raman, chief financial officer and whole-time director of L&T, stated that he has yet to look into the finer details of the 2024-25 Budget announcements. However, he noted: "Private capex is going to be measured and won't happen in a burst."