India’s private sector is now in a much stronger position to invest compared to a decade ago, thanks to improvements in the financial health of corporations, a report by Crisil Intelligence reveals.
Private companies have significantly reduced their debt and strengthened their balance sheets, giving them the flexibility to undertake new investments.
Private companies in India have made significant strides in improving their financial health over the years.
The reduction in debt, coupled with lower capital expenditure (capex), government-led infrastructure initiatives, and fresh equity issuances, has allowed businesses to improve their balance sheets. As a result, many companies have used profits to pay off existing debt.
The debt-to-net-worth ratio has dropped substantially, falling from 1.05 times in FY2015 to an estimated 0.50 times in FY2025.
This improvement means that companies now have ample room to take on new debt for expansion and growth.
Government Policies Boost Investment Climate
Government policies have played a crucial role in improving the investment climate.
Key initiatives, such as the Production-Linked Incentive (PLI) scheme, Make in India, liberalized foreign direct investment (FDI) policies, corporate tax reductions, infrastructure development, Goods and Services Tax (GST), and digital public infrastructure, have created a more favorable environment for private sector investment.
While private consumption in India grew at a slower rate of 5.6% in FY2024 due to weak rural demand, it is expected to recover to 7.6% in FY2025.
This recovery is largely driven by improved rural demand, supported by higher agricultural incomes and lower inflation. However, urban demand has been impacted by higher interest rates and stricter lending conditions for unsecured loans.
Government Measures To Support Investment In Private Sector
The Indian government is taking proactive measures to boost domestic demand and create a favorable investment environment.
Tax benefits introduced in the budget for the middle class are expected to strengthen domestic consumption over time.
Moreover, lower interest rates and controlled inflation are anticipated to enhance consumer purchasing power and, in turn, stimulate demand.
However, geopolitical developments and global tariff actions may continue to create caution among private companies about making large investments shortly.
Despite these challenges, India’s improved financial landscape and supportive government policies are expected to gradually increase corporate investments in the coming years.
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