Private firms' capital expenditure increased by 7% to ₹30.3 trillion in FY25, compared to ₹28.3 trillion in FY24, according to detailed Gross Fixed Capital Formation figures released by the ministry. This growth rate represents a significant acceleration from the previous year's 2.65% growth. The total investments in fixed assets stood at ₹99.76 trillion during FY25, with private non-financial corporations accounting for 30.4% of this investment. Data further revealed that of what India invested in intellectual property — software, research and development, databases, etc.— private corporations accounted for about ₹8.5 trillion, or close to four-fifths of the total. The government and public sector together managed just under ₹1.9 trillion, about a fifth, with the general government alone contributing around ₹1 trillion.
Government capital spending showed a contrasting trend, slowing to 10.2% in FY25 from 18.5% in FY24, as reported by the ministry. Total investment growth held steady at 8.2% in FY25 compared to 9% in the previous year. According to Madan Sabnavis, chief economist at Bank of Baroda, the slowdown in public investment reflects states' efforts to manage fiscal deficits and maintain deficit control.
Machinery and equipment emerged as the largest component of corporate investment, accounting for nearly half the total with growth rebounding to about 6% from barely 1% a year earlier, according to the ministry data. This was followed by spending on dwellings, buildings and structures, while intellectual property products also trailed closely. The shift leaves the broader investment structure intact, with Indian households remaining the largest investors at 43.7% of total fixed asset investments.
Close to three-quarters of household investment - nearly ₹33 trillion - went into dwellings, buildings and other structures, forming the largest investment stream in the entire economy and anchoring a broader construction boom. Buildings and structures of various types, from housing to highways, made up 58.8% of India's fixed investment in FY25. The rest of the investment landscape includes machinery and equipment accounting for 30.6% and intellectual property products for 10.4% of the total.
According to Sabnavis from Bank of Baroda, the corporate investment revival is narrow and not broad-based, concentrated among infrastructure-linked firms rather than spread across industry. He expects Gross Fixed Capital Formation to grow very marginally going forward, with the pattern likely to continue. The household sector is expected to continue leading due to construction investments, while the private sector will be driven by machinery investments. The household sector will continue to lead because of the construction part, while the private sector is more because of machinery investments, according to Sabnavis.
