The share of the private sector in new investment projects rose steadily for three quarters in a row to touch an all-time high of 92.2% in October-December period (Q3FY26), amid a sharp slowdown in government investments. The value of new investment projects, however, declined 6% on year to Rs 10 lakh crore in the period, data from Centre for Monitoring Indian Economy showed.
Tale of Two Sectors
While private sector investment in new projects grew 7.3% on year to Rs 9.2 lakh crore in the three months to December, government investment contracted 61% to just Rs 78,057 crore. Overall new projects announced contracted for two quarters in a row to December on the back of weak government investments.
The latest set of data signals a rising momentum in private sector investments, and improved confidence in the industry about the demand scenario, especially with the consumption boosters unveiled by the government in the form of income-tax and GST reductions. At least in some sectors, increased consumption demand seems to have raised capacity utilisation to the thresholds where expansion projects need to be unveiled. However, the overall quantum of fresh investments doesn’t seem to significantly improve, as the government is in fiscal consolidation mode. The potential of fixed asset creation from the planned investments therefore may significantly lag the levels which economists reckon is necessary to accelerate the GDP growth.
According to the Reserve Bank of India data on a seasonally adjusted basis capacity utilisation improved marginally in the three quarters to Q1FY26 when it stood at 75.8%.
New investment by the government contracted for three quarters in a row beginning June this year. In contrast, private sector investments have been growing. For instance, in June this year when government investment contracted 35% on year to Rs 1.2 lakh crore, private sector investment grew 295% to Rs 6.8 lakh crore. Similarly, in September this year, while government investment contracted 79% on year to Rs 77,721 crore, private sector investment rose 27% to Rs 7.8 lakh crore.
Sectoral Leaders
The share of the private sector in new projects grew from 68.6% in March this year, 85.2% in June this year and 91% in September this year. Within the private sector, while investment by the Indian private sector grew 21% on year in the quarter ended December, investment by foreign private sector contracted 24.2% during the same period.
New projects announced had touched an all-time high of Rs 24.3 lakh crore in the three months to March this year on the back of robust private sector projects of Rs 16.7 lakh crore, a growth of 19.3% on year. Eeven government touched an-all time high of Rs 7.6 lakh crore, a growth of 87.5% on year.
Typically, projects announced pick up in the three months to March. It slows down in the subsequent two quarters and picks up in the three months to December. For instance, total investments touched Rs 11.3 lakh crore in March 2022, Rs 18.6 lakh crore in March 2023, Rs 18 lakh crore in March 2025.
Projects completed in the quarter ending December this year dropped to Rs 1.5 lakh crore from Rs 1.6 lakh crore in the same quarter last year and down from Rs 1.8 lakh crore in the quarter ending September this year.
Gaura Sengupta, chief economist, IDFC FIRST Bank, says the rise in share of the private sector in new projects announced reflects moderate expansion in private projects and sharp decline in government new project announcement. “There could be some pickup in private capex in response to recovery in domestic demand due to GST cut and high capacity utilisation,” she says.
Madan Sabnavis, chief economist, Bank of Baroda says, government capex tends to get lumpy. “It is synchronised with other fiscal metrics and that’s why the biggest pick up is seen in the three months to March,” he says.
The share of the manufacturing sector in the total new investment projects announced was 41% or Rs 4.1 lakh crore, followed by services sector (other than financial) at 32% to Rs 3.2 lakh crore, followed by electricity sector at 23.8%. The share of the mining sector remained stagnant for multiple quarters. The share of the manufacturing sector in the total new investment projects announced surged to an all-time high of 70.2% in the three months to September this year.
