Capex cycle resumption likely in FY24

Forecasting a multi-year-long private Capex cycle resumption from FY24, a Wall Street brokerage on Monday said till then the economy will have to be on the crutches of public spending that will contribute as much as 80 per cent of the productive investments.

Already the private sector Capex is seeing some green-shoots, but its contribution will be muted at 20 per cent of FY22-23 orders. We expect private sector and state-run companies to accelerate Capex cycle growth from FY24 onwards as the country is at the cusp of a multi-year Capex cycle, similar to that seen in FY03-12, Bank of America Securities India said in a note.

The brokerage expects $356 billion worth of orders to be awarded over the next two years, which is a growth of 14 per cent in FY22 and 7 per cent in FY23, 80 per cent of which will be led by the government.

The analysts at the brokerage expect the government to open up large monopolies within gas/power distribution, the Railways, and mining, which will mainly be driving private Capex.

Our analysis of past Capex upcycles suggests that the government breaking up monopolies leads to significant capacity ramp-up, funded by private/foreign capital.