India’s private investment plans offer little evidence of the broad-based acceleration that years of policy support were expected to deliver. In the National Statistics Office’s capex surveys, the unweighted measure of expenditure per enterprise stands at about ₹1.6 billion for actual spending in 2024–25, provisional spending in 2025–26 and intentions for 2026–27.

Manufacturing presents an uneven recovery rather than a sustained expansion. On the same measure, capex per enterprise rises from ₹1.7 billion in 2024–25 to a provisional ₹2.1 billion in 2025–26, before easing to an intended ₹1.9 billion in 2026–27. 

The question is why improved corporate finances have not translated into a more durable appetite for adding capacity.

Policy has addressed several obstacles to investment. Public infrastructure expenditure was expanded to crowd in private capital, corporate taxes were reduced, and production-linked incentives sought to encourage domestic manufacturing. Corporate deleveraging and balance-sheet repair strengthened companies’ ability to invest. Yet businesses have continued to favour debt reduction, cost optimisation and automation over building new capacity. Improving the financial capacity to invest has not been sufficient to create the commercial reason to do so.

Uneven Investment
The restraint is not universal. Mining, electricity and other utilities show stronger expenditure per enterprise, while non-conventional energy, particularly solar, continues to attract investment. Robotics is another area of interest, reflecting the emphasis on automation and efficiency. These pockets of activity coexist with an uneven manufacturing recovery and weaker or stagnant spending across several service industries.

Investment concentrated in a few themes cannot establish that a wider expansion cycle has begun. Spending on automation can improve productivity without reflecting confidence in a substantial increase in sales. Energy transition can generate its own investment requirements even while demand conditions elsewhere remain subdued.

There is also a gap between plans and execution. In the surveys’ separate comparison of intended and actual spending, overall capex realisation fell from about 112% in 2022–23 to 96.3% in 2024–25. Manufacturing realised 90.8% of its intended expenditure in 2024–25, having also undershot plans in the preceding year. This does not make another shortfall inevitable, but it cautions against treating provisional spending and intentions as completed investment.

Missing Demand
The RBI’s Industrial Outlook Survey offers corroborating evidence. Manufacturing business sentiment weakened after its post-pandemic rebound, while capacity utilisation has remained moderate and below the 84% peak reached in 2012. The combination points towards weak and uneven demand as a constraint on expansion, even after many of the financial impediments have eased.

A healthier balance sheet enables a company to finance a project; it does not ensure that the additional output will find buyers. Where existing capacity can accommodate demand and future sales remain uncertain, conserving cash, reducing debt or improving efficiency can offer a more compelling return than committing to a new factory. Corporate caution in such circumstances reflects the investment calculation, not necessarily a shortage of incentives.

The policy imbalance lies in the attention given to corporate finances relative to household purchasing power. Pressure on disposable incomes and a high tax burden constrain consumption, while declining savings add to concerns about household finances. Expecting enterprises to build capacity while households face pressure on spending leaves the strategy dependent on a response that improved corporate cash flows alone cannot produce.

This also helps explain why the post-pandemic rebound has not developed into a sustained investment upswing. Recovery from an extraordinary contraction can lift expenditure temporarily without establishing confidence in demand over the life of a new project. Slower profit growth, rising input costs and uncertainty arising from tariffs and geopolitical disruptions further reduce the urgency to expand.

Policy Limits
Public capex has not overcome this constraint across the economy. Project-financing data show sanctioned costs concentrated in roads, metals and activities dependent on government spending, while industrial and manufacturing projects outside infrastructure and metals remain subdued. Public investment can support businesses directly connected to those outlays without setting off a broader expansion in private capacity.

The issue is therefore the reach of crowding-in, not the absence of all benefits from public expenditure. An investment cycle concentrated around government projects and a few technological transitions is different from one supported by stronger demand across industries. Additional concessions will have limited traction where the restraint arises from uncertain sales rather than the cost of investing.

Nor can the government indefinitely compensate for private restraint. Fiscal consolidation commitments and limited revenue buoyancy are narrowing the space for public spending, while higher interest rates, currency weakness and rising raw-material costs add to corporate caution. A strategy reliant on public expenditure sustaining investment until businesses take over becomes more vulnerable when that transition keeps being deferred.

A durable private capex revival requires stronger demand visibility and a decisive improvement in capacity utilisation. Corporate tax concessions and investment incentives can improve the return on a proposed factory, but they cannot settle the question of who will buy its output. Policy needs to give companies a commercial reason to expand, not merely make expansion cheaper.