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Private capex unlikely to pick up despite high profitability: Crisil
Mar-07-2025

Crisil has said that the private sector capital expenditure is unlikely to pick up in a sustained way despite India Inc's profitability being near decadal high. It added that the profitability of India Inc is set to increase for the third year in a row in FY26 on the back of soft commodity prices. An analysis of 800 companies excluding ones in the banking and finance and oil and gas sectors has revealed that the pre-tax profit margins are set to widen to up to 20 per cent in FY26. Crisil noted that the government is leading the investments in the economy for the last few years, and there have been calls for a revival in the corporate capex as well. However, it also noted that rather than investing to create new capacities, India Inc has deployed money to retire debt and other measures rather than investing it even though the capacity utilization levels are high.

About corporates' capex, Crisil has said that corporates' ability to invest is not matched by the willingness to invest at this stage as the uncertainties due to a volatile global environment, and the unevenness in domestic demand are the factors restraining corporates from investing. The agency estimates India Inc's revenue growth to accelerate to up to 8 per cent in FY26, from the 6 per cent estimated in FY25 and the growth particularly will be led by higher volumes than that of price hikes.

About possible impact of tariffs, it has said that the overall economic climate is very 'foggy' at present given the fast-paced announcements being done by US President Donald Trump, and it will be very hard to make any assessment of the impact of the tariffs and retaliatory moves being undertaken. Meanwhile, it expects that the RBI will deliver another rate cut of 0.25 per cent in April given the comfortable inflation projections and tight fiscal policies which don't stoke price rise. It added the central bank will cut rates by a total of up to 0.75 per cent in FY26, which will make the current cycle of rate cuts a shallow one when compared to the 2.25 per cent of rate hikes on the tightening side. Backing the RBI's decision to keep the policy stance unchanged at 'neutral', it said that the central bank will continue with liquidity management measures and rely more on open market operations rather than using the blunt cash reserve ratio.

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