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Crisil Ratings in its latest report has said that the private industrial capital expenditure (capex) appears to be getting into a whole new cycle after the COVID-19 pandemic hiccup, driven by conducive government support through policy measures such as the Production-Linked Incentive (PLI) scheme and reduced tax rates and accommodative monetary policies and lower interest rates. It noted that other factors contributing to the increased industrial capex include Commodities upcycle, rising merchandise exports, supply chain diversification, healthy balance sheets and global liquidity.

According to the report, the external environment for the capex cycle in the current decade will more likely resemble that seen in the first decade of the century (2000’s) in terms of global liquidity, monetary policies, liquidity, and healthy balance sheets. It said the PLI scheme has given a much-needed booster dose to flailing capex. Without it, capex would have likely taken nearly two years to touch pre-pandemic levels. It added that actualisation of the scheme will result in aggregate industrial capex rising 1.3 times through fiscals 2022-2024 in comparison to fiscals 2018-2020.

The report further said the new capex cycle will be relatively distinct compared with earlier cycles on several counts. It pointed out that asset-heavy sectors such as metals, cement, and mining will see more localised investments, led by large players at their existing sites (brownfield capex). It also stated that in comparison, asset-light ones such as pharma, telecom equipment, mobile, and electronics will see more greenfield capex, led by PLI as well as supply chain diversification. It added that the pandemic-induced focus on digital and automation will spur growth.