Private sector capital expenditure growth has moderated in the September quarter, with new project announcements falling 29% year-on-year to ₹8.8 trillion and 49% sequentially from the June quarter, according to latest data from the Centre for Monitoring Indian Economy (CMIE). However, the Reserve Bank of India's September bulletin maintains its projection of ₹3.2 trillion private capex for FY27, up from ₹2.6 trillion in the previous year. The RBI's assessment of a healthy double-digit growth trajectory for FY27 reflects sustained confidence among private sector investors, despite recent quarterly moderation. As per the RBI report, the phasing profile of pipeline projects financed through banks and financial institutions, external commercial borrowings, and initial public offerings points to continued momentum in capital expenditure.
New private-sector project announcements have surged dramatically, rising from ₹4 trillion in FY14 to ₹35 trillion in FY26, according to a policy brief by the National Institute of Public Finance and Policy (NIPFP). The value of all new projects announced also more than doubled, from about ₹56 trillion during FY11-FY13 to ₹104 trillion during FY24-FY26. However, the nature of project distress has fundamentally changed over the past decade. Governance-related issues such as land acquisition and statutory clearances accounted for just 20% of distressed projects in FY26, compared with 60% in FY14. Unfavourable market conditions and promoters' interests together accounted for nearly 72% of distressed projects in FY26, with NIPFP classifying 80% of distressed projects under 'Other issues' including funding constraints and operational challenges.
Infrastructure continued to dominate the investment landscape in FY26, accounting for 54.2% share in total project costs, primarily driven by investment in the power sector, followed by roads and bridges. According to the RBI report, among other major industries, construction, chemicals and pesticides, metal and metal products, and cement also accounted for sizeable shares in total project costs. The report emphasized that the balance sheet position of Indian corporates has strengthened considerably over recent years, driven by deleveraging and robust internal accruals, while the domestic banking system continues to support economic activity. Simultaneously, the domestic banking system, underpinned by strong capital and liquidity buffers, improvement in asset quality, and sustained credit growth, continues to support economic activity.
Maharashtra emerged as the top destination for capex projects, followed by Gujarat, Rajasthan, Karnataka, Andhra Pradesh and Tamil Nadu. These six states together accounted for 67.1% share in total project costs during 2025-26, with Maharashtra, Rajasthan and Karnataka showing improved shares over the previous year. During 2025-26, 12 mega projects and 100 large projects were sanctioned by banks and financial institutions, with mega projects accounting for 17.0% and large projects for 51.3% of total project costs. The report noted that the share of Maharashtra, Rajasthan and Karnataka improved over the previous year, indicating strengthening investment activity in these states.
The manufacturing sector showed a significant 23.2% decline in new investments in H1 FY27 compared with the same period last year, according to CMIE data. However, mining and electricity sectors recorded higher new project announcements, with new project announcements across both sectors nearly doubling in H1FY27 compared to H1FY26. The Union budget in February had raised capex spending by 9% to ₹12.2 trillion. As per Bank of Baroda chief economist Madan Sabnavis, the government will meet its targets, while private sector momentum may continue though concentrated in infrastructure expenditure and heavy industries. The RBI's September bulletin noted that capacity utilisation remained above the 75% mark, according to the RBI's quarterly Order Books, Inventories, and Capacity Utilisation Survey. Looking ahead, economists expect continued US tariff uncertainty to pose significant risks to India Inc's export-linked capex decisions, potentially keeping new project announcements concentrated in data centres, power, and nuclear projects.
