AI capex slowdown could derail India's cyclical recovery, weigh on growth: Nuvama
Any slowdown in the global artificial intelligence (AI) capital expenditure boom could pose a significant risk to India's ongoing cyclical recovery, with weaker global demand and commodity prices likely to weigh on corporate revenue and credit growth, while a still narrow domestic recovery could amplify the impact, according to Nuvama Research.
A slowdown in global artificial intelligence (AI) capital expenditures could jeopardize India's ongoing cyclical recovery, according to Nuvama Research. The brokerage firm notes that recent cyclical strength in India has been driven by robust corporate revenue growth and increased credit, largely supported by policy measures and a global commodity boom. However, the recovery remains uneven and could be adversely impacted by a global AI capex slowdown.
Nuvama emphasizes that India has only seen limited benefits from the global AI capex cycle, which has contributed to commodity price increases and higher manufacturing inflation. Should investment in AI-related projects diminish, nominal economic momentum could weaken. Additionally, the brokerage highlights an increasing disparity in Goods and Services Tax (GST) collections, with imports growing while domestic GST is lagging, suggesting sluggish domestic demand.
Consumer growth has been sluggish despite government measures such as GST cuts and income-tax reliefs, while real estate sales have contracted. The power sector continues to be the primary driver of India's capex rebound, while other corporate investments remain restrained. Nuvama's assessment suggests that a global slowdown could negatively affect India through weaker commodity prices, reduced exports, and subdued government and real estate investments, all of which could dampen the country's cyclical momentum.
Written by urgent.news from Economic Times Tech's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
