Surge In Bank Funding For Private Sector Projects Signals Strong Private Capex Revival: Kotak Mutual Fund

Private sector capital expenditure (capex) in India is witnessing a remarkable upswing, with bank approvals for projects growing at a compound annual growth rate (CAGR) of 20 per cent since the pre-COVID period, ANI reported.

This trend highlights renewed confidence among businesses and a positive investment climate, according to a report by Kotak Mutual Fund.

The report underscores a significant rise in sanctioned project costs, which have surged from Rs 1,168 billion in FY21 to Rs 5,657 billion in FY24.

"Bank approval for private projects has risen by 20 per cent CAGR since Pre-Covid, pointing towards a robust private capex outlook," the report stated.

This momentum reflects a resurgence in private sector investments, particularly as businesses look to capitalise on improved economic conditions and a favourable lending environment.

While private sector capex remained relatively stable between FY14 and FY19, fluctuating between Rs 2,000-2,300 billion annually, the post-pandemic years have seen a dramatic acceleration.

The initial slump in FY21 due to COVID-19 disruptions has now given way to aggressive expansion, marking a strong recovery.

Notably, the report also highlights the growing synergy between private and government capital expenditure, both of which are driving economic momentum.

Government capex, which initially slowed in FY25 due to the general elections and extreme weather conditions, has shown a strong resurgence since September 2024.

The report predicts that a large portion of government spending will be "back-ended" in FY25, in line with historical trends where expenditures gain momentum after elections and policy adjustments.

The twin engines of public and private capex are expected to provide a strong foundation for sustained economic growth, industrial expansion, and infrastructure development in the near future.