A report reveals that foreign-owned companies in India have not regained pre-pandemic investment momentum, with domestic firms leading a patchy recovery and the absence of ‘superstar’ firms impacting growth prospects.
Foreign-owned companies in India have not regained the investment momentum they showed before the pandemic, according to a report cited by Business Standard, even as domestic groups have continued to expand fixed-asset spending. The paper, titled “An investigation into corporate profits and investment”, said the weighted-average investment intensity of Indian private firms, measured as annual investment in fixed assets relative to the assets held at the start of the year, recovered partly after COVID-19 but has remained broadly flat since FY22.
The report found that gross fixed-asset growth had climbed to 10.64% in FY15 and slipped to 9.94% in FY20 before falling to -1.06% in FY21. It then rebounded to 6.1% by FY24, though the recovery was described as weak rather than strong. Investment as a share of GDP among foreign-owned firms has not recovered since FY21, while Indian business groups have shown a steadier rise. Government-owned companies and Indian private firms, by contrast, saw only a modest rebound before activity levelled off or drifted lower through FY24.
Business Standard also said the composition of the recovery has changed. Before the pandemic, the investment surge was driven by a handful of large, asset-heavy companies, with corporate assets concentrated among firms posting investment intensity of 12% to 14%. Those high-intensity outliers disappeared during the pandemic and have yet to return. Instead, the post-pandemic pattern has been more diffuse, with gains coming from firms clustered around the middle of the distribution rather than from a few dominant spenders.
The paper argued that the absence of those “superstar firms” may help explain why the latest cycle has been so muted, pointing to sectors such as generative artificial intelligence and related fields as potential future drivers of productivity and capital spending. It also said firms appear to be under pressure to restrain fresh investment even as profitability improves, because the return on the next unit of capital has weakened. Reuters has previously reported that other official and market analyses have reached a similar broad conclusion: corporate profits have strengthened sharply since the pandemic, but capital expenditure has remained subdued, with companies increasingly choosing financial investments over new plant and machinery. Mint and Business Standard analysis both suggest the same pattern, while Reserve Bank of India research has linked the profit rebound to pent-up demand, manufacturing resilience and cleaner balance sheets without a matching revival in investment intensity.
Disclaimer: This article is intended to inform and educate, not to recommend or endorse any financial product, investment or strategy. Please consider your own financial circumstances and seek professional advice where appropriate before making financial decisions.
