SBI Research flags lack of private capex; says US tariffs can dent it further
While capital expenditure by the government has been the topic of a lot of discussion in the country, SBI Research has noted that the sluggish capital expenditure by the private sector could prove to be a drag.
Kolkata: Sluggish private sector capital expenditure is a major source of concern, economists of SBI Research, the think tank of State Bank of India has said in a report. "A major source of concern for sustainable growth is the muted private capex," SBI Research has said in the note.
"Data based on survey of 2,170 enterprises (conducted during April '25) ranging from agri, manufacturing, IT etc has indicated that the intended capex for FY26 is significantly lower than the FY25 numbers," wrote the analysts. Then they proceeded to mention, "We believe that the numbers may further decline as US tariff may significantly impact the capex".
Dip of 25%
SBI Research also mentioned two figures as intended capex for the purchase of new assets. What was Rs 6.6 lakh crore in FY25 has now come down to Rs 4.9 lakh crore in FY26 -- a dip of more than 25% in a year.
The policymakers have been suggesting the lack of private capex as a driver of growth for quite some time, while the role has been taken over by the government's capital expenditure. In order to trigger growth the private sector has to now come forward which can only happen if consumption rises in the economy. The government has employed quite a few tricks to trigger growth such as significant income tax relief from the current financial year even at the cots of sacrificing a lot of tax revenue. It will dovetail with the GST reforms which can bring down the prices of a large number of items. The RBI has also brought down the key policy rate to boost consumption. The easing of inflation to multi-year lows should also support discretionary consumption. However, it is yet to happen in a noticeable way.
Growth could be lower than RBI projection
SBI Research has also noted that the rate of growth can be lower at 6.3% in FY26. RBI has projected it at 6.5%. However, the Economic Survey projected a growth rate of 6.3-6.8% this financial year. The GDP growth in Q1 (April-June) of FY26 can be 6.8-7% and attributed it to muted private capex. Incidentally, Indian GDP grew at 6.5% in FY25, a big dip from 9.2% in FY24.
SBI Research thinks the growth in Q2 will be about 6.5% and about 6.3% in Q3 of this year. The RBI projections in the different quarters are 6.5% (Q1), 6.7% (Q2), 6.6% (Q3) and 6.3% (Q4).
SBI Research has also commented on the negative impact of the US trade tariffs. "We may see an effect in revenue and margin pressure in export-oriented tariff-affected sectors, such as Textile, Gems and Jewellery, Leathers, Chemicals, Agriculture, Auto Components, etc, in Q2", the report said.