Introduction
India’s private sector capital expenditure (capex) is set to decline by a quarter in FY26, dropping from Rs 6.6 lakh crore in FY25 to Rs 4.9 lakh crore. While global economic uncertainties and internal challenges weigh heavily on the investment landscape, key sectors such as manufacturing, construction, hospitality, and education are expected to continue ramping up investments, providing some stability amid broader economic pressures.
Key Sectors Driving Capex Growth
Despite an overall decline in capex, several sectors are poised to see significant increases. The construction sector is expected to lead the way, with a projected capex jump to Rs 20,455 crore in FY26—more than double the Rs 9,682 crore estimated for FY25. This marks the sector’s highest spending in five years, signaling robust growth despite the broader investment slowdown.
Similarly, the manufacturing sector is set to witness a 40% boost in investments, reaching Rs 2.1 lakh crore. Manufacturing, which accounts for over two-fifths of the total private sector capex, will remain a cornerstone of India’s economic growth strategy as the nation attracts more investments in its bid to diversify from China.
Challenges Ahead: Global Uncertainties and Slowdown in Other Sectors
However, the outlook for other sectors isn’t as bright. The finance ministry has highlighted that global uncertainties—especially trade tensions and economic instability—are major risks that could hamper private sector investment. In particular, sectors like healthcare and wholesale trade are expected to see a sharp decline in capex, with private investment in healthcare dropping by nearly 60%, from Rs 43,850 crore in FY24 to Rs 17,089 crore in FY26.
Similarly, investments in agriculture are expected to drop by 67%, marking the lowest private sector investment in agriculture in four years. The arts and entertainment industries will also experience a severe decline, with a staggering 95% drop in capex.
Positive Outlook for Hospitality and Education
Despite the overall slowdown, certain industries continue to attract significant investments. The hospitality sector—which includes accommodation and food services—is projected to see a 24% increase in capex, reflecting the growing demand for tourism and hospitality services post-pandemic. Additionally, the education sector is expected to see a 75% surge in investment, underscoring the continued focus on skill development and educational infrastructure in India.
India’s Economic Growth Amid Capex Decline
India’s overall economic growth is expected to remain strong in FY26. The International Monetary Fund (IMF) and the World Bank have both projected India’s GDP to grow at 6.2% and 6.3%, respectively, making it one of the fastest-growing major economies globally. Factors such as personal income tax cuts and lower interest rates are expected to boost private consumption, providing further support to the economy.
Arts, entertainment and recreation industries are expected to suffer a jolt with capex in the segment declining 95 percent. Transportation and storage are set to dip 83 percent, while agriculture is also set to see a 67 percent decline in investment from the private sector — the lowest in four years.
Private capex in agriculture likely peaked at Rs 4,394.7 crore in FY25.
India’s overall capex had likely rose 66 percent between FY22 and FY25, according to data released by the government on April 29.
Conclusion: A Mixed Bag for Private Sector Capex in FY26
While private sector capex is set to decline overall in FY26, sectors such as manufacturing, construction, education, and hospitality are poised to continue their investment growth, providing some optimism in an otherwise uncertain economic environment. As India works to navigate global challenges and maintain its growth trajectory, these sectors will play a crucial role in shaping the country’s economic future.
Related: India’s Growth Forecast: Is FY26 the Year of Economic Revival?
