India's Capex Revival: How Corporate Investment Signals Economic Optimism

The encouraging aspect is the revival in capex by Indian corporations.

Furthermore, the order books data for a representative sample of capital goods firms, which is a key gauge for future capital expenditure, suggest a favourable outlook for capex.

"This momentum is expected to generate positive spillover effects across other industries, supporting the broader capex cycle in the economy," CareEdge Ratings said in its report.

According to the report, capex in sectors such as oil and gas and steel is expected to rise in FY26.

Public sector investment has remained upbeat so far this year, with capex by the centre and state governments (aggregate capex of top 19 states) registering strong double-digit growth.

On the corporate capex front, the aggregate capex of 1,899 listed non-financial companies recorded a growth of 11 per cent, rising to Rs 9.4 lakh crore in FY25. The report noted that the uptick seen in investment announcements and completions during H1 FY26 (CMIE data) signals improving investment sentiment.

“While Centre’s Capex has been healthy, we have also seen an improvement in aggregate state capex in H1 FY26. Moreover, capex by India Inc is showing improvement, led by sectors like Oil and Gas, Power, Telecom and Auto," said Rajani Sinha, Chief Economist, CareEdge Ratings.

The order book of capital goods companies is showing healthy momentum, giving us optimism on the capex outlook, Sinha added. India’s investment-to-GDP ratio has averaged 30.3 per cent over the last four years, as against the pre-pandemic average of 28.6 per cent (FY16-19).

However, the investment to GDP ratio has moderated marginally to around 29.9 per cent in FY25, as the election-related restrictions weighed on the investment scenario in the first half of last year. The report said that this trend is likely to see a reversal in the current fiscal year, as evidenced by signs of capex revival.

- IANS