Construction, hospitality, manufacturing, and education to keep private capex going amid investment slowdown

Private firms in Manufacturing, hospitality to keep the ball rolling in FY26

Private sector capital expenditure is set to taper in the current fiscal due to global uncertainties, but sectors such as manufacturing, education, construction, and hospitality are expected to ramp up investments compared to FY25.

A Moneycontrol analysis of a survey conducted by the statistics ministry shows that construction capex is set to more than double to a five-year high of Rs 20,455 crore in the current fiscal from Rs 9,682 crore expected in 2024-25. The construction sector’s spending nearly halved in FY25 from Rs 17,993 crore in FY24.

Overall private sector capex is set to decline by a fourth in FY26 to Rs 4.9 lakh crore from Rs 6.6 lakh crore expected in FY25.

"Uncertainties stemming from global developments constitute a key risk for the growth outlook for FY26. More than trade, the perception of prolonged uncertainty may cause the private sector to put its capital formation plans on hold," the finance ministry said in its latest monthly economic report.

But it is not just construction; education and water supply are also likely to see significant jumps with private capex witnessing a 75 percent and 53 percent increase, respectively.

The hospitality industry—accommodation and food services—is expected to get a boost, with capex rising 24 percent, while public utilities like electricity and gas may also witness a 37 percent jump.

India’s private consumption is expected to get a boost in FY26 as personal income tax cuts and reductions in interest rates put more money in the hands of people. Projections released by international agencies peg India as remaining the fastest growing economy in the current fiscal.

The International Monetary Fund has projected India to grow 6.2 percent in FY26, while the World Bank in its latest update saw the economy logging 6.3 percent growth.

Manufacturing, which accounts for over two-fifths of the total spending, is expected to witness a 40 percent boost to Rs 2.1 lakh crore.

India is looking to attract more investments as it acts as a counterbalance to China.

Muted investments

Health spending, although higher than the previous year, is expected to stay muted compared to levels witnessed until FY24. The private sector is expected to spend Rs 17,089 crore in FY26 compared with Rs 43,850 crore spent in FY24.

Given the rising trade tensions, FY26 is unlikely to be the year of high spending in the wholesale trade and retail segment. Private investments in the segment are likely to halve in FY26 to Rs 19,056 crore from Rs 46,017 crore.

Arts, entertainment and recreation industries are expected to suffer a jolt with capex in the segment declining 95 percent. Transportation and storage are set to dip 83 percent, while agriculture is also set to see a 67 percent decline in investment from the private sector — the lowest in four years.

Private capex in agriculture likely peaked at Rs 4,394.7 crore in FY25.

India’s overall capex had likely rose 66 percent between FY22 and FY25, according to data released by the government on April 29.