Indian Firms Set to Fuel Economic Boom with $50 Billion Annual Investments Amidst Surging Profits
Indian Companies to Boost Capex to $50 Billion Annually Amid Robust Earnings: Moody’s
Shillong, August 20: Indian companies are projected to allocate $45–50 billion annually for capital expenditure (capex) over the next two years, driven by strong corporate earnings and a burgeoning investment cycle, according to a recent Moody’s Ratings report.
Moody’s anticipates that these companies will expand their capacity to meet the rising demand for consumer goods, with a significant portion of this capex being funded through internal cash flows. Furthermore, investments aimed at increasing vertical integration and achieving net zero targets are also expected to contribute to the heightened spending.
“Capex by corporate sectors in India and Indonesia will remain high over the next two to three years. Overall capacity utilisation for the manufacturing sector in both countries is already quite high, while consumption continues to grow on the back of population growth and a favourable demographic profile,” the report noted.
According to Moody’s, the automotive, metals and mining, technology, media, and telecommunications sectors will together make up approximately one-third of total capex, investing around $15-16 billion annually. Meanwhile, the oil and gas sector is poised to invest 60 percent of the total capex.
Infrastructure spending, increasing domestic energy consumption, and the growing need for connectivity are expected to support earnings across all sectors. Government initiatives aimed at accelerating the manufacturing sector’s growth are seen as additional drivers of capex. Efforts to promote manufacturing to spur economic development and create jobs will further support capacity expansion and sustained investment, the report emphasized.
Despite improvements in domestic liquidity and internal cash flows, offshore funding will continue to play a crucial role. Notably, gross foreign direct investment (FDI) into India surged by 26.4 percent to $22.5 billion during the April-June quarter of the current financial year, according to the Reserve Bank of India’s latest bulletin. Net FDI for Q1 2024-25 rose to $6.9 billion, compared to $4.7 billion in the same period of 2023-24.
Key FDI inflows were observed in the manufacturing, financial services, communication services, computer services, and electricity and energy sectors, accounting for approximately 80 percent of the total.
Original Story https://theshillongtimes.com/2024/08/20/indian-firms-poised-to-invest-45-50-billion-a-year-amid-rising-profits/
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