Private sector investment will pick up in H2 of FY25

Private sector investment is likely to pick up in the second half of the current financial year in sectors like hotel and tourism, after years of government-led robust capex to promote infrastructure building, Kotak Mahindra Bank Chief Economist Upasna Bhardwaj said on Tuesday.

The government has been pushing capital expenditure to promote economic growth. The push in expenditure has helped the country sustain the growth momentum in the aftermath of the Covid pandemic. The government’s capex allocation has more than doubled from Rs 4.39 lakh crore in the 2020-21 fiscal, to Rs 11 lakh crore in 2024-25. “We are at the cusp of that (revival in private investment). Private sector capex I do expect to pick up but largely from second half (October-March) onwards,” Bhardwaj said in an interview.

Although in monetary terms the capex allocation in budget has increased, in percentage terms the increase in allocation has decelerated in 2024-25 to 11 per cent, from around 35 per cent in the previous three financial years. “While the public sector capex is likely to slow down slightly, I do expect to see a fair amount of revival in the private sector in the next two quarters or so,” Bhardwaj said. She said there are early signs of pick-up in private investment in some of the sectors, which are largely linked to infrastructure. “So not just public, but also in private segment it is the infrastructure or the construction-linked sectors which are doing well till now. I do believe we will see private sector capex pick up across other segments as well. “I think, the hotel, tourism segments are still lagging significantly behind and we haven’t seen capacity expansion at all for the last few years. And that’s the segment that will start seeing a fair amount of pick up,” Bhardwaj said.