India’s private capex moderates 2.8% to Rs 11.9 lakh crore in FY26 after record high in FY25: Report

India’s private capital expenditure (capex) cycle moderated in FY26 after touching a record high in the previous fiscal, with private capex rising 2.4 times over the broader FY15-FY26 period but declining 2.8 per cent to Rs 11.9 lakh crore in FY26 from Rs 12.3 lakh crore in FY25, according to a research report by Union Bank of India.

India’s private capital expenditure (capex) cycle moderated in FY26 after touching a record high in the previous fiscal, with private capex rising 2.4 times over the broader FY15-FY26 period but declining 2.8 per cent to Rs 11.9 lakh crore in FY26 from Rs 12.3 lakh crore in FY25, according to a research report by Union Bank of India. The report said the moderation reflects tariff-related concerns and geopolitical uncertainty, even as the post-pandemic revival has significantly strengthened private investment activity.

“Private capital expenditure experienced a pronounced revival after FY22, expanding 2.4× over the broader FY15–FY26 horizon and peaking at a record Rs 12.3 lakh crore in FY25,” the report said. Private capex had gathered substantial momentum following the pandemic, supported by economic reopening and improved demand. The capex-to-GDP ratio rose from 2.9 per cent in FY22 to 3.9 per cent in FY25, before moderating to 3.4 per cent in FY26.

The report noted that the slowdown indicates that the initial wave of post-pandemic expansion has stabilised amid external uncertainties. “The post-pandemic momentum slowed in FY26, with private capex softening 2.8% to Rs 11.9 lakh crore and the capex-to-GDP ratio tapering down to 3.4%,” it said.

It added that the moderation was driven by “tariff woes and geopolitical uncertainty”, highlighting the impact of global trade and geopolitical developments on corporate investment decisions. Despite the overall decline, the report said investment activity remains concentrated in select capital-intensive sectors, particularly infrastructure-linked industries such as steel and cement, energy transition and renewables, automobiles and select beneficiaries of the Production Linked Incentive (PLI) scheme.

However, a broad-based revival remains elusive, with sluggish rural demand, uneven urban consumption growth and lingering spare capacity in mid-tier and consumer-facing industries constraining investment across consumption-oriented and traditional manufacturing sectors. “While large corporate balance sheets are in robust health, overall capacity utilization across broader manufacturing has hovered near thresholds that prompt debottlenecking rather than widespread greenfield commitments,” the report said.

Sectorally, FY26 capex growth was narrow, with only four of 18 sectors recording an expansion. Metals led the growth with a 32.6 per cent increase, followed by logistics at 24.8 per cent, power at 15.4 per cent and healthcare at 1 per cent. Power emerged as the largest capex sector in FY26, with investment of Rs 2.28 lakh crore, followed by crude oil at Rs 1.99 lakh crore. Together, power and crude oil accounted for 35.7 per cent of aggregate FY26 capex.

The report said the outlook for India’s investment cycle remains positive over the medium term, with renewables, energy storage, GCCs, data centres, semiconductors, electronics, defence and advanced manufacturing expected to provide new investment opportunities. It concluded that the capex cycle is becoming “broader, greener and more technology-led”, although project execution, external demand, geopolitical uncertainty and rising global protectionism will remain key risks. (ANI)