Budget 2026: How to revive private sector capex to sustain high growth— 4 experts share views

Despite US tariffs and geopolitical risks, the Indian economy remains in solid shape due to strong domestic demand, growth-supportive policies, government capital expenditure, and a growing consumer base.

According to the World Economic Situation and Prospects 2026 report by the United Nations’ Department of Economic and Social Affairs, India’s economy is estimated to have grown 7.4% in calendar year 2025 and is expected to expand by 6.6% in 2026.

Consultancy firm Grant Thornton Bharat, according to news agency PTI, expects the Indian economy to grow at 7.3 to 7.5% in FY26, and at 7% in FY27.

While most domestic macro factors remain in place to drive the Indian economy higher at a healthy pace, global uncertainties remain key variables that cannot be overlooked.

Against this backdrop, experts say that private sector capex (capital expenditure) remains a key factor in sustaining India's high growth trajectory.

While reviving private-sector capital expenditure is a prerequisite for the economy to fire on all cylinders, it necessitates multi-pronged action from the government.

With Budget 2026 around the corner, Mint spoke to experts to gain insights into the measures the government should announce to boost private sector capex. Here’s what they said:

How to revive private capex in India?

Manoranjan Sharma, Chief Economist at Infomerics Ratings

Budget 2026 should signal a decisive shift from a public capital expenditure-led approach to a growth model anchored in private investment.

A calibrated mix of fiscal incentives, improved access to finance, regulatory clarity, and sector-specific policy support can unlock substantial private capital expenditure and reinforce India’s medium-term growth momentum.

Fiscally, measures such as investment tax credits, full expensing of capital outlays, and lower effective tax rates for high-capex projects can improve investment viability.

Financing support through low-cost credit windows, interest subvention, and deeper corporate bond markets can further ease funding constraints.

Regulatory reforms, including a digital single-window clearance system, faster approvals, and a predictable policy framework, can significantly reduce execution delays.

Complementing these should be a strong sectoral focus through mega investment zones, incentives for R&D-intensive capital expenditures, and targeted support for green economy investments.

Enhanced public-private partnerships and risk-sharing mechanisms, such as expanded viability gap funding and selective sovereign guarantees, alongside demand-side support via export incentives and infrastructure-linked spending, can complete the ecosystem.

Upasna Bhardwaj, Chief Economist, Kotak Mahindra Bank

The tax cuts announced by the government in 2025 have helped stabilise the consumer demand outlook— one key driver for private capex revival. Furthermore, monetary easing has also set a conducive environment.

However, the other driver of private investment remains the global demand/export outlook, which clearly looks clouded with uncertainty.

The elevated tariffs and a threat of more will create several hurdles.

We, thus, expect the government to prepare a comprehensive subsidised package for ensuring adequate financing and smoothing the credit cycle for the export sector to adjust to the disruptions.

Besides, the government should continue its focus on infrastructure to keep the investment momentum intact.

Radhika Rao, Senior Economist and Executive Director at DBS Bank

The Budget is likely to stay committed to further supply-side measures to draw in private sector investments, as a key offset to global uncertainties.

Higher capital expenditure outlays are projected for infrastructure, which includes railways, roads, highways, defence, and transfers to states, collectively representing around 80% of effective capex.

Strategic sectors would be prioritised, which include defence, semiconductors, electronics, renewable energy, artificial intelligence/robotics, etc.

Budget allocations towards the defence sector have targeted modernisation and expansion of the indigenous manufacturing capacity, with indications of a double-digit increase in the FY27 Budget.

Next, lower regulatory friction will be prioritised via a focus on deregulation and decriminalisation to identify and eliminate redundant or outdated compliance obligations in key sectors, besides potentially tabling the updated edition of the Jan Vishwas Bill.

There could also be a consideration to reintroduce the concessionary corporate tax rate for new manufacturing companies, providing a tailwind to fresh investment commitments.

G Chokkalingam, the founder and head of research at Equinomics Research Private Limited

India’s economic growth is now largely driven by domestic capital. Foreign capital in the form of FDI is not growing adequately to stimulate economic growth.

Simultaneously, FPIs' outflow has been substantial in recent times. These two trends, along with US tariffs, are set to weaken the rupee further, apart from moderating economic growth.

Hence, the Budget should focus on a strategy which can address both growth and stability of the rupee as well. It should focus on accelerating private capex, especially for import substitutes.

This would help in both accelerating domestic manufacturing GDP and also in improving the rupee exchange rate.

Improving exports depends on several exogenous factors which are not under our control. But improving the production of import substitutes is endogenous to the system.

The budget should pursue an aggressive strategy for extending PLI schemes to a huge number of import substitutes.

An appropriate tax structure should be formulated to push private capex in the area of import substitutes and also to reduce imports of competing products into the country.

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