Government capital expenditure (capex) is the primary driver of GFCF growth. This is supported by public sector enterprises, states, and the union government.
Budget 2026 Expectations: Industry Looks To Govt Capex As Private Investment Stays Soft
In the first half of this fiscal, PSU capex is expected to grow at a robust 29.9 per cent YoY.
Source : ABPLIVE AI
Government spending is driving India’s growth and capital formation, with GFCF seen rising 7.8% in FY27, as weak private capex sentiment fuels calls to revive industry animal spirits.
Government capex is set to retain its position as the prime driver of growth in gross fixed capital formation (GFCF) which, according to a India Ratings (Ind-Ra) forecast last week, is expected to grow 7.8 per cent yoy in financial year 2027 (FY27) after a robust 7.1 per cent growth in FY25 facilitated by a good buoyancy in public sector spending. Key components of government capex are public sector enterprises, 24 states and the union government. In the first half of this fiscal (1HFY26), PSU
Frequently Asked Questions
What is driving growth in gross fixed capital formation (GFCF)?
Why has private investment been low?
Private capex growth has trended down due to subdued corporate sentiment, US tariff hikes, and lingering domestic inefficiencies like high power and land costs.
Which sectors are showing increased capex activity?
Sectors like power, transmission and distribution, logistics, warehousing, commercial and retail real estate, cement, healthcare, and roads are showing stepped-up capex activity.
What is being done to encourage private investment?
The government is advancing domestic reforms, including deregulation. Suggestions include incremental tax credits and compliance relaxations for firms meeting investment milestones.
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