Public capex slips in July: Four key government agencies record 23% y-o-y decline in July; tariffs weigh on private investment

Capital expenditure by major central public sector enterprises (CPSEs) and four key government bodies declined 23% year-on-year in July to Rs 53,406 crore, partially attributed to a high base effect, according to a senior official, quoted by Economic times.Experts believe public capital expenditure, including CPSE investments, remains vital for the nation's economic growth this financial year, as external challenges- particularly uncertainties from the US's announcement of 50% additional tariff on India- could potentially impact domestic private investments.Notably, expenditure by CPSEs and four major government agencies with annual capex targets exceeding Rs 100 crore each- the Railway Board, National Highways Authority of India (NHAI), Delhi Metro Rail Corporation and Damodar Valley Corporation- increased 2.5% annually from April to July to Rs 2.21 lakh crore, driven by 15% growth in the June quarter.In July last year, capital expenditure by CPSEs and the four agencies increased significantly, following released pent-up demand after June quarter's slowdown due to administrative delays around the 2024 general election.The central government has significantly increased its capital investments this fiscal year. Its capex rose 52% in the June quarter to Rs 2.75 lakh crore, albeit on a lower base. The finance ministry continues to monitor and encourage regular capital expenditure across departments and CPSEs.

This oversight is essential as private sector planned capex is expected to reduce to Rs 4.9 lakh crore this fiscal from Rs 6.6 lakh crore in 2024-25, according to the Forward-Looking Survey on Private Sector Capex Investment published by the statistics ministry on April 29.The Railway Board leads in spending from April to July with Rs 79,152 crore, followed by NHAI at Rs 45,683 crore, according to finance ministry data.

Major CPSE spenders include ONGC (Rs 11,155 crore), Indian Oil Corporation (Rs 10,733 crore), NTPC (Rs 11,782 crore), PowerGrid Corporation (Rs 9,045 crore), BPCL (Rs 4,806 crore), and Coal India (Rs 4,702 crore).These organisations have established a combined capex target of Rs 7.85 lakh crore for 2025-26, approximately 3% below the actual expenditure of Rs 8.07 lakh crore in the previous fiscal year.The International Monetary Fund's July projection maintains India as the world's fastest-growing major economy for the next two years, forecasting growth at 6.2% for FY26 and 6.3% for FY27, exceeding global averages by more than twofold.However, following the US announcement of additional tariffs on India, various agencies are revising their forecasts downward, with some predicting a 30-80 basis point reduction in growth due to the increased duty burden.