CEA Nageswaran Calls for Capex Push Amid EV Growth Momentum

Why It Matters

Corporate capex is essential to narrow the trade deficit, enhance export competitiveness, and keep India’s growth and fiscal goals on track.

Key Takeaways

• Top 500 firms' profits up 31% but capex stagnant.
• $140 billion goods‑trade deficit pressures need private investment.
• Rupee‑yuan REER gap narrows, making China imports costlier.
• Diversify supply chains, use FTAs to expand exports.

Pulse Analysis

India’s post‑pandemic corporate landscape presents a paradox: profitability has surged while capital spending remains muted. Data from the Confederation of Indian Industry shows that the top 500 listed companies have enjoyed an average profit increase of roughly 31% per year since 2020, yet their net investment as a share of earnings has slipped below pre‑COVID levels. This disconnect limits the creation of new production capacity, constraining the country’s ability to translate strong balance sheets into tangible economic expansion. Analysts warn that without a capex revival, the private sector’s contribution to GDP growth will stay modest.

The chief economic adviser highlighted a shifting competitive landscape driven by currency dynamics. The real effective exchange rate (REER) gap between the rupee and the yuan has narrowed, making imports from China relatively more expensive and Indian exports more price‑competitive. Coupled with India’s extensive network of free‑trade agreements, this creates a timely window for firms to diversify supply chains, reduce dependence on Chinese inputs, and tap into new markets in Europe, the Middle East, and Africa. Such a strategic pivot could also help mitigate exposure to geopolitical shocks that have driven global oil and fertilizer prices higher.

From a policy perspective, the $140 billion annual goods‑trade deficit underscores the urgency of mobilising private capital. The government’s fiscal target for FY‑27 hinges on curbing inflation, which is threatened by rising energy costs and a weaker monsoon. By encouraging higher corporate capex—particularly in sectors like renewable energy, fertilizers, and logistics—India can build strategic buffers, boost export volumes, and ease pressure on the fiscal balance sheet. Nageswaran’s call for a coordinated investment push therefore aligns with broader macro‑economic goals: sustaining growth, stabilising prices, and enhancing the nation’s global trade position.