Govt capex drives private investment surge; CII urges price restraint

New Delhi: The government’s strong capital expenditure programme has triggered a revival in private investment and growth in their order book, Confederation of Indian Industry (CII) said on Sunday.

The industry lobby urged businesses to “absorb a meaningful share of input cost pressures within its own margins,” and asked the government to slowly phase out the March excise duty cut on petrol and diesel over a 6–9 month period.

Government spending on asset creation is crowding in private capex, which rose 67% year-on-year to ₹7.7 trillion in the year to September 2025, CII said, citing an analysis of nearly 1,200 companies.

Manufacturing led the way, accounting for ₹3.8 trillion or nearly half of total private capex, led by metals, automobiles and chemicals. Services contributed ₹3.1 trillion, or about 40%, driven by trading, communications and information technology (IT) or IT-enabled services, it said.

Capacity utilisation in factories rose to 75.6% in the September quarter of FY26 from 74.3% in the previous quarter, the lobby group said in a statement.

Bank credit growth, too, has rebounded sharply, averaging close to 14% in the second half of FY26 against around 10% in the first half, suggesting a revival in the investment cycle that took hold last fiscal.

Private enterprise is committing capital at scale, and across sectors, in a manner not seen in well over a decade, Chandrajit Banerjee, director general of CII, said in the statement.

The Centre’s capital expenditure outlay for the current financial year is ₹12.2 trillion, nearly 12% more than the amount estimated to have been spent in the year to 31 March 2026.

The ₹10 per litre central excise duty cut on petrol and diesel, taken at significant cost to the exchequer, should be progressively rolled back in tranches over six to nine months as crude prices stabilise, the statement said.

Fuel strategy

It is part of CII’s five-point ‘action agenda’ for the duration of the West Asia crisis and beyond. CII also proposed to its members to lower fuel and energy consumption by 3-5% over the next two quarters in various ways including fleet electrification and more green energy usage.

Larger businesses could commit to a voluntary 45-day MSME payment guarantee, backed by aggressive use of trade receivable discounting and supply-chain finance to ease the working capital pressure on small enterprises, CII said.

It also proposed that businesses may frontload their FY27 investments in manufacturing, energy transition and digital infrastructure, follow voluntary price restraint on essential inputs and scale up internship intake over the next twelve months under the PM internship scheme.

The proposal comes as the energy shock from the West Asia crisis threatens to raise inflation and interest rates in the economy.

The West Asia war may temporarily hurt India’s growth rate and dampen investment sentiment, but the conflict poses no existential threat to most businesses, Rajiv Memani, president of CII said in an interview to Mint last week.

Finance minister Nirmala Sitharaman assured last week that the government will not let the volatile external situation affect Indian businesses.