India’s capital expenditure landscape appears to be entering a phase of resurgence, with project announcements nearly doubling since the pre-pandemic period.According to Mahesh Vyas, MD & CEO of CMIE, annual new investment proposals have risen from ₹20 lakh crore to around ₹40 lakh crore over the past few years, with project completions also showing an uptick. However, he cautions that despite this jump, the rate of actual project execution—especially when adjusted for inflation—remains less impressive.
S&P Global Ratings, on the other hand, remains optimistic. Neel Gopalakrishnan, Director at S&P, shared that based on bottom-up analysis of capital expenditure plans by India’s top listed and large unlisted companies, private sector capex is expected to double between FY26 and FY30.
Much of this momentum is seen coming from infrastructure sectors, especially renewable energy and transportation, while traditional industries like steel and cement are expected to grow at a slower pace.Despite the upbeat projections, both experts acknowledged potential hurdles. Vyas pointed out that a significant share of current investments is government-led, with manufacturing still lagging behind. He remains cautious about private investment, especially given global uncertainties around tariffs and dumping.Gopalakrishnan also flagged implementation challenges, particularly in renewables, although he believes execution capabilities have improved in recent years.These are the edited excerpts of the interview.Q: Mahesh You tell me what is the state of capex. I got the sense from your table that projects announced are rising, but projects completed are not rising that much?Vyas: There is always a big lag between the project announcements and projects completed. But if you look at the 10-year horizon and for investments, one needs to look back at a horizon there is a significant increase in capex in India. We have nearly a doubling, not a doubling, but a near doubling of investments, whether it is in announcements or in completion. We used to have about ₹20 lakh crore worth of new investment proposals being made every year till before the pandemic. After the pandemic, that number is nearly ₹40 lakh crore. So 20 has become 40, which is a kind of a doubling. In the last three years you look at the numbers like there is a little blip up and down, but nevertheless, these numbers are clearly double of what they used to be.If you look at total completions, also you have, like, around ₹5 lakh crore worth of completions happening before the pandemic and there were lots of ups and down, too much of noise. But nevertheless, what we have now is closer to 7 to 8 trillion, thereabouts. 2024-2025 we saw a small fall to just 6 trillion. Number may get revised a bit, but still it was a little slow down. Nevertheless, if you look at the long picture, both the numbers have gone up significantly, whether new announcements or their completions.Q: If you adjust for inflation, it doesn’t look like the actual amount is very good, and especially when you look at completion, where the difference is not very big, around 5 trillion has become about 6 trillion average in the last five years. If you adjust for inflation, it doesn’t look very big, no?Vyas: You are right, if you adjust for inflation, it doesn’t look very good. But for a long time, the investment story was so depressing that we are so pleased to see this doubling, even if there is inflation. Mind you, inflation has gone down, so you have to adjust less for inflation now compared to what you had to do earlier.Q: Neel, I have this very optimistic report of yours for FY26 to FY30. Can you just give us a word on whether you looked at anything in the previous years like up to FY26 anything at all that you saw?Gopalakrishnan: The way we came up with our estimate was a kind of a bottoms up approach, where we looked at some of the largest companies, we looked at the announcements made by the 100 largest listed companies in India, and this was across sectors. And to that, we added some of the large unlisted companies, many of which we rate as well. Also looked at a study on capex done by Crisil Intelligence in India.What we looked at was essentially the guidance on capital expenditure, which is more short term. Typically, companies do this for a year or two. We also looked at some of the announced capacity targets of companies over the next five years, and that’s the way we worked our capex out. And as our study showed, a large pickup in private sector capex is coming from the infrastructure sector, where we expect capex to double in the next five years, whereas the industrial sector, which is the traditional steel, cement, and some of the other sectors, like telecom, their investments will rise at a much slower pace, on average, about 40 to 50%.Q: Mahesh, your any reaction to this? The point that Neil’s report makes is that they expect it to double, partly because there are very obvious announced instances in power, power transmission, airports and aircraft. I mean, those are very obvious. And then there will be the other organic expansions, plus they point out that balance sheets are very clean now both of the lenders, that is the banks and the corporates, which will do the investing, and that’s how they base their doubling of capex. Your thoughts?Vyas: I haven’t seen the Crisil report to make a fair comment on that. With that disclaimer, I may say that to the last point you made, that the balance sheets are very clean, companies can easily gear a lot more. Their profits have been superb in the last several years. Their debt-equity ratio is extremely low. Interest cover is extremely healthy so the balance sheet of the Indian corporate sector is superb, and the banks are also in a good place to lend.But this story has been true for a very long time, and investments by listed companies and large unlisted companies is a very depressing story. I did a little study few weeks ago, and found that if you look at the growth in outstanding net fixed assets between 2006-2007 and 1920, there was a certain growth, and that growth rate has halved since then. So although profits have multiplied multiple times, it’s not a percentage increase, it’s a multiples increase in profits. But net fixed assets today is growing at 4% per annum nominal terms. So the balance sheets don’t give me any great confidence that the Indian corporate sector listed or unlisted, and I am talking about a sample of 30,000 companies accounting for a very large part of India’sRead Here | India Inc’s capex growth slows to a 4-year lowQ: So the very good or very heartening bar chart that we played of yours that total investment proposals have gone up from an average of 20 trillion in the 2010 to 2020 period are up to now 40 trillion that is largely government capex. Then it’s not so much private capex? Vyas: Yes, a large part of it is government capex and infrastructure, and not manufacturing. Infrastructure is largely funded by the government. So you see, government, or rather infrastructure, accounts for nearly 60% of all investments in India. Manufacturing is only around 26% or 30% thereabouts.Q: Neil, on your optimistic analysis of 25 to 30, there are two red flags. One, that government capex will slow. I mean, during the COVID years, we saw that 30% rise and then a 15% rise in government capex, clearly. FY26 we are seeing a little bit of a pullback. It can’t grow because the fiscal deficit has to come down. So would that be a big red flag and of course, this tariff picture Chinese dumping over capacity, can these two affect your number?Gopalakrishnan: That’s a valid question, and at any point, you would see significant fluctuations if your period of analysis is relatively short. If you are looking at maybe year to year comparisons, you would see a big rise in a year, and similarly, maybe sharp falls in some other years. In our study, what we have looked at is the actual private sector capex in the last five years versus what we think would be a potential capital expenditure investment in the next five years. So the investment period is relatively longer.Just responding to Mahesh point, I think it was an interesting observation, and I agree there have been implementation challenges once companies announce projects. But what we have noticed is and that’s something we have highlighted in our report as well, that particularly in the renewable energy space, which is where a significant amount of the incremental investments are coming in there are material execution risks.But our observation is in the industrial sectors like say, steel, cement companies have overcome this, and their ability to deliver complete projects in time has significantly improved. For example, if you look at the leading steel companies, their execution record is pretty impressive. If I go back to renewable energy, the 500 gigawatts target is appears challenging, and if you look at execution over the last few years, it’s fallen well short of where it needs to be.But again, if you look at the recent trend, the last year, at least, the industry has been able to add about 25 to 30 gigawatts of capacity, which is probably double what it was in the previous year. If you look at projects under implementation, it’s in excess of 100 gigawatts. So progress is being made. There are risks. We don’t deny it, but based on guidance from companies, targets given by companies, and there could be a slippage here and there, delay here and there. But we think the ability to execute is improving.Q: Would you go with this positive assessment, or would you give a lot of weight to the worry that we are in a tariff ridden world, and it takes a brave CEO to put money when we do not know which product will be taxed, how much in which country?Vyas: I would be cautious and I am always cautious. I am cautious because most of the manufacturing industries, which are large capex, like steel is the biggest where investment is happening in manufacturing and that is susceptible to price changes, to dumping, to tariffs and so on and so forth. So our biggest investment in manufacturing does face challenges.Our investments in manufacturing, to an extent, is problematic. I would expect CEOs to be circumspect and not be too gung ho and going and setting up very large plants at this stage. Fortunately, or unfortunately, manufacturing accounts for only about 25 to 30% of investments, so less of a risk over there. 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