The government has been emphasizing capital investment in infrastructure, with the finance minister stating that it will attract private investments. However, bankers and business leaders are not seeing an immediate response from India Inc. They are waiting for an increase in demand and capacity utilization before committing to investments.

Large corporations are currently focused on reducing debt and cleaning up their balance sheets. They are not eager to invest until demand and capacity utilization improve. A top banker, speaking anonymously, believes significant private sector investment is still 12-18 months away. While some ancillary demand may increase due to public investments, major private sector capital expenditure will take time.

Industry leaders appreciate the government’s efforts to boost public capital investment, seeing it as the best option for now. They believe this support should continue for the next 1-2 years. The government is urging the private sector to follow suit and play their part in the investment cycle.

The Reserve Bank of India’s data shows fluctuations in manufacturing sector capacity utilization. Industry insiders suggest that capacity utilization must reach a critical level before private investments increase significantly.

Market optimism is currently driven by government initiatives, with investments and borrowing being mostly government-related. Private sector investments may rise once confidence in demand returns.

Following the budget announcements, the markets responded positively, with the Sensex, Nifty, BSE, and NSE indices showing gains. The push for infrastructure investment led to significant increases in metal and capital goods indices at BSE, as well as industrial and banking indices.