India's capex cycle to strengthen as investments seen rising to USD 2.2 tn by FY30: Morgan Stanley
New Delhi, July 14
India's capital expenditure cycle is expected to strengthen further over the coming quarters, led by a gradual pickup in private sector investment, with overall investments projected to rise 1.8 times to about USD 2.2 trillion by FY2030, according to a Morgan Stanley report.
"We expect incremental capex of about US$1tn, as overall investments increase 1.8x over the next five years, to US$2.2tn. This should lift the investment rate to roughly 37.5% by F2030, from its current rate of 34.6% of GDP," the report noted.
The report said the central government is expected to maintain its budgeted capital expenditure target of Rs 12.2 trillion, or 3.2 per cent of GDP, with continued focus on infrastructure and defence. It also expects private capex to accelerate on the back of healthy domestic demand, policy support and a gradual recovery in exports.
Morgan Stanley said India is at the beginning of a sustained capex upcycle, supported by four key drivers -- energy security and energy transition, defence, manufacturing supply chains, including electronics and semiconductors, data centres and infrastructure development. According to the report, these multiple investment drivers are expected to make the capex cycle more durable and resilient over the medium term.
The report noted that recent high-frequency economic indicators for June remained resilient despite global uncertainty, while easing commodity prices and improving supply chains are likely to support both domestic and external demand. It added that new and ongoing investment projects improved sequentially during the June quarter, with manufacturing, electricity and IT services recording stronger growth.
According to the report, central government capital expenditure reached Rs 2.5 trillion during April-May FY27, accounting for about 20.5 per cent of the annual budget target and marking a 13.4 per cent year-on-year increase. About 53.4 per cent of this spending was directed towards roads and railways. State government capex, however, remained relatively subdued, while capital spending by Central Public Sector Enterprises tracked at 17 per cent of their FY27 budgeted target.
The report also highlighted continued progress under the Production Linked Incentive (PLI) scheme. It said investments across 14 PLI sectors reached about Rs 2.4 trillion by FY26, generating incremental production worth Rs 22.7 trillion.
Gross foreign direct investment also touched USD 100.9 billion on a 12-month trailing basis, while net FDI improved to a 25-month high of USD 11.9 billion, indicating improving investment trends.
— ANI
Reader Comments
This is promising, but I worry about state-level capex being 'relatively subdued' as mentioned. Central spending is great, but states need to step up too. Otherwise, the benefits won't reach all corners of India.
Encouraging numbers from Morgan Stanley. The PLI scheme showing ₹22.7 lakh crore production is impressive. But let's ensure we're not just creating capacity without demand. Need to boost consumption too for a balanced growth.
I'm cautiously optimistic. The focus on energy transition and data centres is forward-looking. But we need to watch the fiscal deficit and ensure this capex doesn't lead to inflation, especially for common people.
Good news, but I wish the report addressed how much of this investment will benefit small businesses and startups, not just big corporations. Inclusive growth should be the real metric.
The 92% of state capex being subdued is concerning. Central government can't do everything alone. Need more cooperation between Centre and states to make this upcycle truly pan-India.
Hope this translates into better infrastructure for tier-2 and tier-3 cities. The investment in roads and railways is good, but we need better connectivity for smaller towns to truly unlock India
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