Why is India Inc not investing as much as it can? UBS report points to one major reason

India Inc's big reluctance to invest has largely to do with all this uncertainty surrounding global trade deals, a report by UBS Securities India has pointed out. The lack of clarity on international trade is a significant factor hindering long-term capital expenditure (capex) by Indian companies, news agency ANI reported citing UBS's findings.The report stressed that trade agreements are critical for fostering investment as these generally help reduce business uncertainty.Finance Minister Nirmala Sitharaman recently voiced concern regarding the sluggish pace of corporate investment during a recent event in New Delhi. She highlighted that despite substantial capital initiatives from both the central and state governments, private sector investment has not kept up.Sitharaman noted that the government has two primary tools to stimulate investment: public spending and attractive policy-making. However, the anticipated acceleration in private sector investment has not materialised, especially in the years following the pandemic and the resolution of the twin balance sheet problem in 2019.The Finance Minister pointed out that although corporate balance sheets are healthier today, funds that could be invested are instead being held passively. This stagnation raises concerns about why corporates are not utilising available resources to expand operations and enhance production capabilities. Private capex: A mixed pictureRajiv Memani, President of the Confederation of Indian Industry (CII), however argued that private capital expenditure is indeed taking place across various sectors in India.Although he acknowledged a slowdown over the past six to eight months, Memani attributed this to external factors rather than structural deficiencies within the economy. The report indicated that private capital expenditure has seen a compound annual growth rate (CAGR) of 19.8% from FY21 to FY25E, driven by key sectors such as oil and gas, power, automobiles, and commodities.This growth trajectory suggests that while there are challenges, the foundations for private sector investment remain strong, UBS said.While concerns around trade uncertainty persist, some of the key indicators show that private capital expenditure continues to progress, albeit at a cautious pace. According to economists, the interplay between government efforts and corporate responses will be vital in determining how India's private investment landscape plays out.