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Corporate woes: Two charts that show why it’s taking so long for capex to revive

If return on capital employed is so low, where’s the incentive to go in for capex?

May 30, 2019 / 01:14 PM IST
Corporate woes: Two charts that show why it’s taking so long for capex to revive

It’s well-known that capex has not picked up, especially private sector capex. There are many reasons -- spare capacity, lack of demand, competition from imports and so on. But in the final analysis, businesses will expand capacity provided the return or profits from investing in new capacity is worth it. But take a look at the accompanying chart. (image) It shows the return on capital employed (ROCE) for non-finance companies in this century. The data has been sourced from CMIE. Note...

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