A new engine for India's growth? Private investment finally picks up pace

India's economic expansion is beginning to rely less on government spending and consumer demand as private investment shows signs of finally picking up, Reuters reported on Tuesday.

The shift comes as India's economy grew 7.8% in the April-June quarter, extending its run of stronger-than-expected growth to 12 consecutive quarters. Investment jumped 11.9% during the period.

The pickup is significant for an economy that has spent years relying on government-led infrastructure spending to support investment.

Don't Miss: 'Japan provides powerful inspiration': Ex-CEA backs PM Modi's push for domestic spending 

Private Capex Picks Up

Government spending on infrastructure now appears to be encouraging companies to put more money into their own projects, analysts and bankers told Reuters.

Investment accounted for 34.3% of the economy in the April-June quarter, up from 31.4% a year earlier, according to the National Statistics Office.

"Barring COVID-period volatility, this is the strongest real investment print since late-2018 and reaffirms our view of improvement in corporate capex momentum," Citi analysts were quoted as saying.

Private investment has been picking up in sectors including automobiles, renewable energy, and defence

Saurabh Sanyal, secretary-general of industry body ASSOCHAM, said capital investment led largely by the private sector rose by more than Rs 5 lakh crore ($52.7 billion) from a year earlier. He also pointed to increased investment in railways, artificial intelligence, and semiconductors.

Must Read: GST mop up rises 14.8% to nearly ₹2 lakh crore in August, refunds climb 68%

Credit Demand Adds To Momentum

The investment cycle is also showing up in lending.

Bank credit was growing at more than 19% in the fortnight ended July 31, its fastest pace in a decade, according to RBI data. Credit to industry rose 20%.

Amitabh Chaudhry, CEO of Axis Bank, told Reuters last month that large companies, non-bank lenders, and gold loans were driving some of the demand. But lending remained strong even after those categories were excluded, he said. "There is a broad-based growth which you are seeing."

Listed companies increased capital expenditure by 11% in the financial year ended March 2026, compared with 8% previously, according to Citi data.

Citi expects the investment recovery to continue into fiscal 2027. It cited stronger demand visibility from fiscal 2026 stimulus, ample funding, lower interest rates, healthy corporate balance sheets, and high capacity utilisation.