NEW DELHI: After years of urging industry to step up investment, Finance Minister Nirmala Sitharaman is seeing signs of a turnaround. Speaking at the FE Leadership Awards last week, she said private investment is picking up, though concentrated in select sectors. The September 2025 GST reforms have helped make consumption and demand more visible, giving industry greater confidence to invest, produce and expand, she said.
The data largely bears this out. Gross fixed capital formation (GFCF) grew 11.9% at constant prices in the April-June quarter, pointing to a strong but uneven investment cycle. Investment by the private sector is limited largely to infrastructure-based industries while consumer goods industries are seeing a relatively slower pace of capital spending. During 2025-26, banks and financial institutions (FIs) sanctioned loans to 1,032 projects with an aggregate project cost of Rs 4.4 lakh crore, compared with 907 projects having a total project cost of Rs 3.7 lakh crore in the previous year, according to data compiled by Reserve Bank of India staff.
Overall, investment intentions were recorded for 1,839 projects during FY26, amounting to Rs 5.6 lakh crore, as against 1,581 projects in FY25 with investment intentions of Rs 5 lakh crore, reflecting sustained investment intentions by the private corporate sector. Rising private sector growth has continued in FY27 too. The value of new investment projects announced grew 35% year-on-year to Rs 31 lakh crore in the first half of the financial year, according to data from the Centre for Monitoring of Indian Economy.
The announced outstanding private capex pipeline stood at Rs 99.7 lakh crore in July-September, which is 39% higher than a year ago and 87% higher than two years ago. Manufacturing and electricity made up 74% of the outstanding pipeline.
However, much of the pipeline is limited to a few sub-sectors. The top four sub-sectors of power generation, information technology (IT) and IT-enabled services (ITeS), metals, and chemicals account for 80% of the pipeline in the September quarter, for instance. In terms of new projects announced, IT grew over 2000% in April-September, while machinery and electricity rose 252% and 63%, respectively.
Data on bank credit to the infrastructure sector, capital goods imports, and capital goods production also point to a pickup in private investment. While non-food bank credit rose 19.1% as of September 30, lending to the power sector was up 23%, according to RBI data. Bank credit to airports and ports also grew 12.8% and 21.9% as of September-end. Notably, credit to the construction sector jumped 30%.
Sitharaman noted higher imports are being used for domestic production meant for exports. “A major part comprises imports meant for export production. Raw materials are being brought in because we need them and do not produce them domestically,” she said.
Other sectors seeing higher private sector investment include semiconductors, green hydrogen, artificial intelligence, data centres, and critical minerals. “Emerging sectors like data centres & AI infrastructure, nuclear & renewable power and select conventional sectors like steel, chemicals and pharmaceuticals lead the wave of new project announcements,” as per Union Bank of India economists led by Kanika Pasricha. Government support is also supporting private sector investment. India is running overlapping investment cycles across 12 emerging sectors — deep-tech, capital-intensive green infrastructure, digital infrastructure, and strategic manufacturing — they said in a report.
“Each is anchored by a flagship central scheme — several still in draft — and increasingly by large private and hyperscaler capital. For lenders, this is one of the broadest simultaneous capex cycles in India’s recent history, but capital intensity, financing readiness and credit risk vary sharply sector to sector,” the economists said. This concentration among a few sectors may be driving the investment cycle right now but it is also the biggest risk to the private capex recovery going ahead.
“While investment intentions remain encouraging, the pace of actual capital formation will depend on the timely implementation of sanctioned projects and the evolution of the external environment,” RBI staff had said in a paper in the central bank’s September bulletin. “Continued policy support, macroeconomic stability, and sustained improvements in the ease of doing business will be essential for translating these investment intentions into durable capacity creation and long-term economic growth.”
Source: The Financial Express
