The 2017 edition of EY’s India Cost of Capital Survey finds that the cost of equity has remained constant since the last survey in 2014 while interest rates have declined. The 2014 survey was the first-of-its-kind attempt to understand the threshold cost of equity used for capital allocation and investment decisions and the process by which practicing finance professionals in the industry make capital costing decisions. Since the first survey, there have been many changes in the Indian economy. Among the most significant of these changes is a reduction of over 200 basis points in interest rates, driven by falling inflation on the back of declining commodity prices and fiscal and monetary prudence.

The 2017 edition of the survey encapsulates the responses of 135 respondents from corporate India, spread across different sectors and sizes. The highest cost of equity is in the real estate sector; followed by engineering, procurement, and construction (EPC); and oil and gas. On the other hand, the lowest cost of equity is noted in the fast-moving consumer goods (FMCG) and capital goods sectors.