India's private capital expenditure has experienced a significant decline, with spending per enterprise falling from ₹260 crore in FY23 to ₹160 crore in FY26, according to the latest Systematix Shares and Stocks (India) report. The brokerage firm highlighted findings from the National Statistics Office (NSO) capex surveys, which show planned FY27 outlays showing no rebound from current levels. The conversion of intended capex into actual spending has also weakened substantially, with the realisation ratio declining from 112% in FY23 to 96% in FY25, suggesting FY26-FY27 investments may undershoot current plans. As per Systematix Institutional Equities, after peaking at ₹2.6 billion per enterprise in FY23, private capex has fallen 38% to a provisional ₹1.6 billion in FY26, with intended spending for FY27 showing no improvement.
The manufacturing sector has shown mixed performance, with capex declining from ₹220 crore in FY22 and FY23 to ₹210 crore in FY24 and ₹170 crore in FY25, before recovering to ₹210 crore in FY26, as reported by Systematix. The intended capex per enterprise for manufacturing in FY27 stands at ₹190 crore. However, several sectors including agriculture, forestry and fishing, construction, wholesale and retail trade, and repair of motor vehicles and motorcycles have recorded lower or stagnant capex per enterprise in recent years. Conversely, non-conventional energy is exhibiting positive trends, led by strong momentum in solar investments, while robotics is emerging as a bright spot due to increasing automation and digital transformation trends. According to Systematix, private investment witnessed a strong recovery after the pandemic, but provisional spending for FY26 and planned investment for FY27 stand at ₹1.6 billion each, significantly below the levels recorded during the recovery period.
Recent analysis reveals that India's capital productivity has declined drastically, with the economy achieving a maximum growth rate of 7.8% in Q1FY27 despite an investment rate of 34.3%. As per Business Standard, in its over 75-year journey since national accounts data became available, the economy has delivered at least an 8% growth rate in seven years, but 2023-24 (FY24) did not yield 8% growth in the new series. The investment rate was around 30% in four of those seven years, but in recent years, while investment rates have been above that threshold, the economy has failed to achieve sustained 8% growth. This decline may be attributed to the government driving the economy with infrastructure capex, which has a higher gestation period than other economic segments. India previously had better capital productivity than most peers, but not Vietnam and Malaysia, suggesting the need for reforms to achieve sustained 8% annual growth rates.
Despite the Indian economy remaining on a strong footing, corporate investment behaviour appears cautious due to weak demand visibility, slowing profit growth, rising costs, and geopolitical uncertainties, according to Systematix analysis. The firm suggests that private capex may remain a laggard unless demand conditions improve meaningfully, leaving government spending and sectors such as energy transition and automation to shoulder the burden of capital formation. However, experts believe while the revival of private capex is important, the market is currently focusing on near-term headwinds including elevated crude prices, high US bond yields, and sustained FII selling. The Systematix report notes that the post-pandemic surge in private investment now appears less a durable capex upcycle and more a cyclical rebound from the extraordinary contraction of the pandemic years, despite several government initiatives over the past decade to boost private investment.
