India’s FY27 growth seen at 7.1–7.3%, but private investment must pick up: Deloitte

India's economy is expected to grow 7.1–7.3 per cent in FY 2026–27 and 6.6–7 per cent in FY 2027–28, according to Deloitte India's latest economic outlook, which said a sustained revival in private investment could provide an additional source of demand and expand the country's productive capacity.

The report said household spending and public investment in infrastructure have supported India's growth over the past decade. However, private investment has taken longer than expected to recover despite improvements in connectivity, business conditions and corporate balance sheets.

Private investment crucial to sustaining growth

Rumki Majumdar, Chief Economist at Deloitte India, said businesses now have better connectivity, healthier balance sheets and higher capacity utilisation, strengthening the case for expansion.

“Over the past decade, India’s growth has rested on resilient household spending and a sustained push in public infrastructure. Businesses now have better connectivity, healthier balance sheets, and higher capacity utilisation, which are strengthening the case for expansion. The question is whether these conditions will encourage private investment to play a larger role in boosting growth in the coming year,” Majumdar said.

She added that a durable revival in private investment could strengthen domestic demand and help expand India's productive capacity.

Higher capacity utilisation signals investment momentum

Recent indicators offer grounds for optimism. Gross fixed capital formation grew 11.9 per cent in the first quarter of FY27, its fastest expansion in four years.

Capacity utilisation has averaged above 75.7 per cent for six consecutive quarters, according to the report. With spare capacity declining, companies have a stronger incentive to invest in new facilities and equipment.

Credit growth in industry has reached an all-time high of 20 per cent, while micro, small and medium enterprises are seeing faster growth in credit demand. Capital goods production, machinery orders and equipment purchases are also indicating that some investment decisions are moving towards implementation.

Semiconductors, clean energy among key investment areas

The report said the sectoral mix of investment is broadening, with information technology emerging as a contributor alongside energy, resources and industrials.

Investment in strategic sectors, including semiconductors, electronics, defence manufacturing, clean energy and artificial intelligence infrastructure, could add to the momentum because these areas require substantial upfront spending.

“A durable revival will add to India’s capacity creation and support employment and productivity,” Majumdar said.

Global risks and execution challenges persist

However, Deloitte cautioned that geopolitical tensions, energy-price volatility and trade disruptions remain risks to the outlook. Global shocks, commodity-price fluctuations, shipping disruptions and tariff uncertainty have delayed major investment decisions in recent years.

The report said faster land acquisition, predictable approvals, reliable utilities and effective contract enforcement will be important to turn investment plans into operational projects. State and local governments also have a role in improving the investment process. Better logistics networks and access to ports could support industrial clusters connecting manufacturers with suppliers, skilled workers, research institutions and export markets.

(With ANI inputs)