Capex dips in Q2, may stay muted for a while

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₹1.2 trillion were announced by companies during the July-September period, marking a whopping 82% sequential decline and 77% year-on-year decline. The figures are provisional and may be updated later.

“With aggressive interest rate hikes since 2022, a slowdown in global demand, increased geopolitical risks, and rising protectionism globally, a reduction in project announcements is not surprising," said Sujan Hajra, chief economist and executive director at Anand Rathi Shares and Stock Brokers. “Furthermore, the consumer demand structure in India is shifting away from manufactured products and towards services." These factors are likely to impact the pipeline of investments in the near term, economists believe.

Ahead of the 2024 Lok Sabha elections, a host of other factors such as the global slowdown and domestic policy uncertainty could keep new proposals on the sidelines. “As of now, there has been a slower momentum in the previous quarter or so and probably it will get a little slower as we move on to the election period," Madhavi Arora, lead economist, Emkay Global Financial Services said.

“But that is typical of any kind of investment and does not mean there is an overall negative scenario." Before the 2019 general elections, around ₹9.9 trillion worth of projects were announced between April and September 2018, which dropped to ₹9.2 trillion in the following two quarters. Similarly, in the run-up to the 2014 polls, the value of project announcements dropped 15% in the second half of the 2013-14 compared to the first six months, the CMIE data showed.