Despite a significant surge in corporate profitability following the COVID-19 pandemic, private capital expenditure (capex) in India continues to lag, a trend that has drawn scrutiny from government officials and industry leaders alike. Harsh Goenka, Chairman of RPG Enterprises, recently outlined several critical reasons contributing to this weakness, following discussions with various businessmen.
Key Obstacles to Private Investment
Goenka highlighted several factors impeding private sector investment. These include:
- Policy and Tax Uncertainty: Businesses are hesitant to commit long-term capital when the regulatory and fiscal environment is perceived as unstable or unpredictable.
- Fear of Regulatory Action: Concerns over sudden or arbitrary regulatory interventions create a cautious investment climate.
- Weak Demand Visibility: In some sectors, a lack of clear, strong future demand makes companies reluctant to expand production capacity.
- Protracted Legal and Approval Processes: Delays in legal clearances and obtaining necessary approvals can significantly deter new projects.
Furthermore, Goenka pointed to a structural shift, noting that many startups and new-age companies favor “asset-light” business models over investing in physical infrastructure like factories. He also observed a generational shift within family-run businesses, where younger heirs are increasingly focusing on family office investments rather than direct operational engagement and expansion.
Government and Economic Advisor Concerns
Goenka's observations echo sentiments previously expressed by Chief Economic Advisor V Anantha Nageswaran. Earlier, Nageswaran publicly questioned why private investment remained subdued, especially given that corporate profits for BSE 500 and NSE 500 companies had grown at an annual rate of 30.8% post-pandemic. He suggested that entrepreneurs might be choosing to accumulate cash profits or establish family offices elsewhere, rather than investing in “real assets on the ground.”
Finance Minister Nirmala Sitharaman has also repeatedly expressed her concern, querying why companies are reluctant to invest despite lower corporate taxes, improved bank health, and substantial public infrastructure spending by the government.
Industry Perspective: Signs of Revival?
While Goenka and government officials express caution, the Confederation of Indian Industry (CII) offered a more optimistic outlook. According to the CII, private capital expenditure surged by 67% year-on-year to Rs 7.7 lakh crore by September 2025, which they view as evidence of a “broad-based revival” in India’s investment cycle. This suggests a nuanced situation where underlying challenges persist, even as some indicators point towards a potential upturn in certain segments of the economy.