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Agriculture is the main occupation in India, accounting for over 17 percent of GDP. The country’s GDP is mainly driven by the service sector, which constitutes over 53 percent, including IT and ITES contributing 8.1 percent to the overall GDP.

However, India’s economic growth is expected to pick up speed from 6.8 percent in 2016 to 7.2 percent in 2017 after a modest setback due to weaker-than-expected investments and effects of withdrawal of large denomination bank notes. According to the Finance Ministry of India, the annual growth rate of the economy decreased to 6.8 percent in FY 2016-2017 as compared with 7.6 percent in FY 2015-2016. In terms of purchasing power parity, India’s GDP, at around $8.7 trillion, was the third largest in the world in FY 2016. India’s GDP was approximately $2.26 trillion with a per capita GDP of more than $6,658 in financial year (FY) 2016, and the economy grew at 7.1 percent in 2016-17. Moreover, gains from GST and other structural reforms, combined with low oil prices will contribute towards the country’s growth. India has nearly overcome this disruption, and is expected to sustain the growth momentum going forward. The structural reforms in the form of demonetization and GST implementation in late 2016 and mid of 2017, respectively, have led to a temporary and short-term dip in industrial activities. The overall CapEx in India has been declining since 2011 and a break in this trend was observed during 2013- 2014. Cement and chemical sectors spend more than 10 percent of their revenues on CapEx. On average, while the electric power industry spends 28 percent of its revenue on CapEx, metals industry spends 14 percent of its revenue on CapEx. According to ARC Advisory Group’s India CapEx Survey 2016, capital spending as a percentage of revenue is relatively high in the cement, chemical, electric power and metals industries in India. On the infrastructure front, government has allocated huge investments for building roads, railways, airports, and ports and companies are likely to rev up their capacity expansion activities to meet domestic demand in the coming years. However, in the long run the rise in domestic demand will increase the value creation through these assets. There are some sectors like power generation and cement that are burdened with overcapacity and underutilization of assets. The plan for expansion and upgrades of refineries to meet the BS norms for vehicle fuels is also underway. Major investments have been planned for infrastructure development that would in turn push the domestic steel companies to increase production and plant capacity. Companies are building best-in-class industrial facilities to meet the growing needs of the country’s expanding consumer class. Industrial companies are seizing the present growth opportunity that India offers. However, ARC’s India capital expenditure report focuses exclusively on India’s capital expenditure analysis and includes the CapEx trends for leading industries in the country, such as automotive, cement, chemical & petrochemical, electric power, metals, oil & gas and refining, food & beverage, and pharmaceutical. We calculate CapEx in two separate segments: based on the money spent on acquiring and upgrading total fixed assets, and on the money spent on acquiring and upgrading the plant and machinery.ĪRC also publishes a global CapEx report (ARC’s Capital Expenditure Report) focused on industries for all world regions including North America, EMEA, Asia, and Latin America. In this periodic report, ARC Advisory Group looks at the CapEx for India’s Manufacturing Industries to identify trends.

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Product and Service Lifecycle ManagementĪ company incurs capital expenditure (CapEx) – the capital utilized to buy fixed assets or to add to the value of existing fixed assets – to acquire or upgrade physical assets on plant and machinery, land and buildings, property, and such others.