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Key Points

The State Bank of India warns that private capital expenditure for FY26 shows concerning decline compared to FY25 levels. US tariffs present additional headwinds that could further weaken investment intentions across sectors. While government spending has driven recent growth, the economy now urgently needs private sector participation to sustain momentum. The report emphasizes that private investors must "hold the baton now" for sustainable economic expansion.

Key Points: SBI Warns FY26 Private Capex Outlook Lower Than FY25 Amid US Tariffs

  • FY26 private capex projected lower than previous fiscal year
  • US tariffs pose additional risk to investment climate
  • Government spending alone insufficient for sustained growth
  • Private sector must take baton to drive economic momentum
2 min read

Private capex outlook for FY26 lower than FY25, SBI warns of further decline amid US tariffs

SBI report reveals private capital expenditure for FY26 lags behind FY25 levels, with further decline risk due to US tariffs and muted private investment.

"Data indicated that the intended capex for FY26 is significantly lower than the FY25 numbers - SBI Report"

New Delhi, August 22

The intended private capital expenditure (capex) for FY26 is significantly lower than the numbers of FY25, and may decline further amid the impact of US tariffs, according to a report by the State Bank of India (SBI).

The report highlighted that while government spending has been driving growth, the economy now urgently needs private sector participation to sustain momentum.

It stated "Data........ indicated that the intended capex for FY26 is significantly lower than the FY25 numbers"

The report stressed that private investors must "hold the baton now," as muted private investment remains a major concern for sustainable growth.

Based on a survey of 2,170 enterprises conducted in April 2025 across agriculture, manufacturing, IT and other sectors, SBI noted that the intended capex for FY26 is not only below FY25 levels, but also faces risks of further weakening due to global trade headwinds.

According to the data in the report, actual private capex stood at Rs 3.9 lakh crore in 2021-22, rising to Rs 5.7 lakh crore in 2022-23, before declining sharply to Rs 4.2 lakh crore in 2023-24. In recent years, private capex has stagnated at around Rs 4.9-6.6 lakh crore.

The intended investment for FY26 is pegged at Rs 6.6 lakh crore, but the report highlighted that this is still not very encouraging when compared to the scale required for higher economic growth.

The report pointed out that while government capital expenditure has lifted the economy, private investment has not complemented or crowded in to the same extent.

The peak elasticity of government capex to GDP stands at 1.17, suggesting that public spending has provided a push to economic activity. However, the muted presence of private investment is acting as a constraint, limiting the multiplier effect of government-led initiatives.

"The somehow somber elasticity at 1.17 implies in the Indian context that government capital expenditure has been able to lift the economy to a higher trend. However, the muted presence of private investment is a clear constraint to push the multiplier to ever higher levels," the report stated.

The report emphasized that since public investment has already done the heavy lifting in recent years, the next phase of growth can only be sustained through stronger private sector participation.

- ANI

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Reader Comments

P
Priya S
As a small business owner, I can confirm the hesitation to invest. Global uncertainties + domestic regulatory hurdles make us think twice before expanding. Need more stable policies and easier credit access!
M
Michael C
Working in manufacturing sector - the US tariffs are definitely making companies cautious. Many are waiting to see how trade relations evolve before committing to new investments. Smart move but bad for growth numbers.
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Ananya R
The government has done remarkable work with infrastructure spending, but now private sector needs to step up. Maybe we need better public-private partnership models and faster project clearances? 🤔
S
Siddharth J
While the report highlights valid concerns, I feel it's a bit too pessimistic. Many sectors like renewable energy and digital infrastructure are seeing good private investment. The picture might not be as bleak as portrayed.
N
Nisha Z
This is why we need to focus more on domestic consumption and reducing import dependence. Global headwinds will keep affecting us otherwise. Make in India needs stronger push! 💪

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