Private capex revival takes hold, capital formation at 3-year high: Economic Affairs Secretary Anuradha Thakur

Private investment in India is demonstrating clear signs of a strong revival, with capital formation in the first quarter of the current financial year growing at its fastest pace in more than three years, according to Economic Affairs Secretary Anuradha Thakur.

Speaking at the Kautilya Economic Conclave, Thakur noted that private corporations are actively committing to new projects, particularly across key sectors such as power, data centres, and metals. Concurrently, bank credit allocation to industry, large and medium enterprises, as well as micro and small businesses, is gaining substantial momentum.

"We have seen with dismay that private investment is not picking up but now, the results are beginning to show. Investment is once again leading growth," Thakur said.


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She pointed out that this investment turnaround is unfolding against a challenging global economic backdrop where capital remains constrained. Highlighting India's strong foreign investment track record, Thakur noted that the country attracted a record gross Foreign Direct Investment (FDI) inflow of USD 97 billion in FY26. This trajectory has persisted into the current financial year, with first-quarter gross FDI inflows reaching approximately USD 30 billion.

Thakur expressed strong confidence in India's standing, asserting that credibility established through ongoing fiscal discipline, structural reforms, and deregulation serves as a vital competitive advantage.

"Measures can be announced, but credibility that our country has earned is one that is gained through sustained efforts," she said, underlining the necessity of maintaining a prudent fiscal path.

She also underscored the resilience of India's international trade relations, citing the successful execution of multiple Free Trade Agreements (FTAs) in recent years.

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"We have followed this path through steady reform, prudent macroeconomic management," she said, adding, "The Centre's fiscal deficit has come down from a high of 9.2 per cent of GDP just five-six years back to a budgeted 4.3 per cent this year, and the fiscal anchor is moving in tune with global trends towards a declining debt-to-GDP ratio."

Furthermore, Thakur cited inflation targeting, non-performing assets (NPAs) touching multi-decadal lows, robust foreign exchange reserves, and recent credit rating upgrades as key indicators of the nation's solid macroeconomic fundamentals—essential factors for securing capital at reasonable rates during periods of global tightening.

Global geopolitics, AI, and capital dynamics

Addressing broader international developments, Thakur remarked that the durability of global economic partnerships based on fair rules remains essential for supporting worldwide growth. Her statements come amid heightened trade policy uncertainties, including recent US tariff measures and the increasing use of trade restrictions for strategic objectives.

Thakur warned that geopolitical considerations could impair the efficiency of international trade and financial flows.

"When trade is organised around security and geostrategic concerns over comparative advantages, goods and capital move less efficiently," she said, noting that persistent trade surpluses and deficits may increasingly cause friction and escalate global capital costs.

Additionally, she identified the rapid growth of the Artificial Intelligence (AI) investment cycle as a critical driver reshaping global capital demand.

"The AI investment cycle is not limited to software or computing. It requires data centres, semiconductors, reliable electricity and transmission capacity," she said.

Thakur observed that infrastructure expansion in these sectors requires immense capital, much of which is being debt-financed.

"More investments would mean greater demand for savings, while higher borrowing means that financial markets have to absorb a large supply of debt," she said.

Consequently, global bond yields are no longer governed solely by standard central bank monetary policy or government budget deficits, as changing investment compositions and expanding capital demands play an increasingly critical role. These observations align with recent spikes in global bond yields over the past week, driven in part by escalating geopolitical tensions.

During a separate session at the conclave, former Finance Commission chairman N K Singh emphasized public accountability and fiscal transparency in governance.

"All citizens have the right to ascertain by themselves through representatives the need for a public tax to consent to it freely to follow up on its use and to determine its proportion, basis, collection and duration," he said, asserting that society retains the right to demand a complete accounting from every public authority.