Private capex outlook for FY26 lower than FY25, SBI warns of further decline amid US tariffs

The intended private capital expenditure (capex) for FY26 is significantly lower than the numbers of FY25, and may decline further amid the impact of US tariffs, according to a report by the State Bank of India (SBI).

The report highlighted that while government spending has been driving growth, the economy now urgently needs private sector participation to sustain momentum.

It stated "Data........ indicated that the intended capex for FY26 is significantly lower than the FY25 numbers"


The report stressed that private investors must "hold the baton now," as muted private investment remains a major concern for sustainable growth.

Based on a survey of 2,170 enterprises conducted in April 2025 across agriculture, manufacturing, IT and other sectors, SBI noted that the intended capex for FY26 is not only below FY25 levels, but also faces risks of further weakening due to global trade headwinds.

According to the data in the report, actual private capex stood at Rs 3.9 lakh crore in 2021-22, rising to Rs 5.7 lakh crore in 2022-23, before declining sharply to Rs 4.2 lakh crore in 2023-24. In recent years, private capex has stagnated at around Rs 4.9-6.6 lakh crore.

The intended investment for FY26 is pegged at Rs 6.6 lakh crore, but the report highlighted that this is still not very encouraging when compared to the scale required for higher economic growth.

The report pointed out that while government capital expenditure has lifted the economy, private investment has not complemented or crowded in to the same extent.

The peak elasticity of government capex to GDP stands at 1.17, suggesting that public spending has provided a push to economic activity. However, the muted presence of private investment is acting as a constraint, limiting the multiplier effect of government-led initiatives.

"The somehow somber elasticity at 1.17 implies in the Indian context that government capital expenditure has been able to lift the economy to a higher trend. However, the muted presence of private investment is a clear constraint to push the multiplier to ever higher levels," the report stated.

The report emphasized that since public investment has already done the heavy lifting in recent years, the next phase of growth can only be sustained through stronger private sector participation.