Capex concentration: Why ₹10 trillion in new projects doesn't signal a broader revival
With private players only participating selectively and public spending remaining subdued, signs of a broader capex revival remain elusive.
The animal spirits seem to be stirring, but the scoreboard tells a mixed story. New project announcements rose nearly 16% sequentially in the October-December quarter (Q3 FY26), almost doubling the momentum seen in the previous three months. Yet, investment activity contracted year-on-year for the second straight quarter, weighed down by persistently weak government capital expenditure and modest private sector participation.
According to the Centre for Monitoring Indian Economy's (CMIE) project-tracking database, new projects worth ₹10 trillion were announced in Q3 FY26, down from ₹10.5 trillion in the same quarter a year ago. However, announcements saw a steady quarterly progression within FY26, climbing from ₹8 trillion in Q1 to ₹8.6 trillion in Q2 and ₹10 trillion in Q3, largely on the back of private investment as government capex remained subdued. The data is provisional and may be updated later.
Private sector investment fueled 92% of the quarter's headline growth, contributing ₹9.2 trillion in commitments. This stands in sharp relief to the government’s capex, which failed to grow between Q2 and Q3 after contracting from Q1 to Q2.
A narrow recovery
Sectoral trends underscored the narrowness of the recovery. Investment proposals in the manufacturing segment fell sharply to ₹4.1 trillion in Q3 FY26 from ₹6 trillion in the previous quarter and ₹5.2 trillion a year earlier. The decline persisted despite ongoing production-linked incentive (PLI) support, reinforcing the sector’s loss of momentum.
On the other hand, new investment in electricity rebounded to ₹2.4 trillion in Q3 FY26 from ₹0.9 trillion in the previous quarter, while in services (excluding financials) capex intentions surged to ₹3.2 trillion from ₹1.2 trillion. Construction and real estate remained subdued at ₹0.3 trillion, unchanged from the year-ago period. Together, the surge in electricity and services accounted for the entire sequential growth in Q3 and compensated for the manufacturing slowdown, the analysis showed.
Large projects also highlighted this concentration. The top five projects announced in Q3 FY26 together accounted for almost 35% of total investment, led by a near ₹1-trillion data centre project in Visakhapatnam, a ₹0.7-trillion AI data centre and GCC campus in Telangana, and renewable power projects worth roughly ₹1 trillion combined.
This showed that incremental capex remains concentrated in power and services, and in India’s push to meet its rising electricity demand and build AI infrastructure. “AI is a phenomenon that has caught on in a big way across the world and in India," said Madan Sabnavis, chief economist at Bank of Baroda. "It is also one of the high priorities of the government," he said, adding that the trend was likely to persist because of this.
Project execution also saw a recovery. While new project announcements in the first nine months of FY26 fell to ₹26.6 trillion from ₹44.6 trillion in FY25, the value of projects completed rose to ₹5.8 trillion from ₹5.5 trillion. With this, execution touched an at least seven-year high, suggesting the investment cycle is currently focussed on completing projects. However, with private players only participating selectively and public spending remaining subdued, signs of a broader capex revival are not yet visible.
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