Private capex unlikely to pick up despite near decadal-high profitability: Crisil

Private sector capital expenditure is unlikely to pick up in a sustained way despite India Inc's profitability being near decadal high, domestic ratings agency Crisil said on Thursday.

The profitability of India Inc is set to increase for the third year in a row in FY26 on the back of soft commodity prices, the agency said.

An analysis of 800 companies excluding ones in the banking and finance and oil and gas sectors revealed that the pre-tax profit margins are set to widen to up to 20 per cent in FY26.

It can be noted that the government is leading the investments in the economy for the last few years, and there have been calls for a revival in the corporate capex as well.

However, rather than investing to create new capacities, India Inc has deployed money to retire debt and other measures rather than investing it even though the capacity utilisation levels are high.

"Their (corporates') ability to invest is not matched by the willingness to invest at this juncture," the agency's chief economist D K Joshi told reporters here.

He said the uncertainties due to a volatile global environment, and the unevenness in domestic demand are the factors restraining corporates from investing.

"Given the uncertainties in the environment, given the unevenness in demand, I think it will take time before the private corporate capex lifts in a very sustained or an animal spirits kind of a revival," he added.

India Inc's revenue growth is set to accelerate to up to 8 per cent in FY26, from the 6 per cent estimated in FY25, the agency said, stressing that this will be on the back of higher volumes and not price hikes.

The overall economic climate is very "foggy" at present given the fast-paced announcements being done by US President Donald Trump, and it will be very hard to make any assessment of the impact of the tariffs and retaliatory moves being undertaken, he said.

Replying to a specific question on the inflationary impact of the tariff moves, Joshi made it clear that he wouldn't revisit his inflation forecasts yet because of a variety of factors like certain import contracts being long-term in nature.

The RBI will deliver another rate cut of 0.25 per cent in April given the comfortable inflation projections and tight fiscal policies which don't stoke price rise, he said.
Joshi said he expects the central bank to cut rates by a total of up to 0.75 per cent in FY26, which will make the current cycle of rate cuts a shallow one when compared to the 2.25 per cent of rate hikes on the tightening side.

Backing the RBI's decision to keep the policy stance unchanged at "neutral", Joshi said the central bank will continue with liquidity management measures and rely more on open market operations rather than using the blunt cash reserve ratio.

The agency expects real GDP growth to come at 6.5 per cent in FY26, as compared to 6.4 per cent in FY24.