India’s capital expenditure landscape is witnessing a broad-based revival, with improvements across the public and private sectors, setting the stage for sustained economic momentum in FY26 and beyond, CareEdge Ratings said in a report.
Public sector capex remains the bedrock of this resurgence. The Centre’s capital expenditure surged 40% year-on-year in the first half of FY26, driven by heavy allocations to food and public distribution, roads, and railways. Even after normalising for the unusually high disbursement to the Department of Food and Public Distribution, underlying capex growth stood at a robust 29%. States have complemented this effort strongly; aggregate capex by 19 major states rose 13% year-on-year. Maharashtra, Madhya Pradesh, and Gujarat led the pack, while Telangana and Andhra Pradesh staged notable recoveries after a muted FY25. The Centre’s Rs 1.5 trillion interest-free loan scheme for states continues to play a pivotal role, with Rs 500 billion already released in H1FY26.
The private sector is finally shaking off its earlier restraint. Aggregate capex of 1,899 listed non-financial companies jumped 11% to Rs 9.4 trillion in FY25, with oil & gas, power, telecom, automobiles, and metals leading the charge. Power, automobiles, and non-ferrous metals recorded particularly sharp increases. Fresh investment announcements soared 15% year-on-year to Rs 15.1 trillion in H1FY26, overwhelmingly private-sector driven, with manufacturing claiming 57% of the total (metals and chemicals dominating). Project completions doubled to Rs 4.1 trillion, led by government-led transport infrastructure.
CareEdge on oil and gas
CareEdge expects oil & gas capex to rise 3% and steel 7% in FY26. The power generation sector will remain a key growth driver, with overall capex projected to grow at an 8% CAGR from FY26 to FY28. Within power, renewables including storage are the standout segment, forecast to expand at a 13% CAGR as capacity nearly doubles from 28 GW in FY25 to 53 GW by FY28.
Leading indicators reinforce the positive outlook. Order books of a representative sample of capital goods companies swelled 21% in FY25 and another 7% in H1 FY26, signalling a healthy execution pipeline. Maharashtra continues to top the charts in both new announcements and completions, with private players accounting for 92% of fresh proposals in the state.
What did Rajani Sinha say?
CareEdge Chief Economist Rajani Sinha said: “Overall, while the capex outlook appears optimistic, we remain cautious about the challenges arising from an uneven domestic demand recovery, elevated external economic uncertainties and global trade policy headwinds.”
Amid a volatile global economic environment, a durable and broad-based domestic demand recovery remains critical for sustaining this investment momentum, Sinha added.