New Delhi [India], January 2 : India's investment recovery in the Financial Year (FY) 2026 is being driven overwhelmingly by infrastructure and capital-intensive industries, rather than consumer-facing sectors, highlighting an uneven yet policy-driven growth cycle.
According to Bank of Baroda Economic Research, new investment announcements during the first nine months of FY26 rose to Rs 26.62 lakh crore, higher than the Rs 23.88 lakh crore recorded in the same period last year.
Nearly 80 per cent of total investment intentions came from just five sectors, including electricity, chemicals, metals, information technology and transport services. Infrastructure-oriented industries alone accounted for approximately 48% of the announced investments, while chemicals accounted for an additional 22%. In contrast, consumer-oriented industries made up less than 3% of total investment plans.
The power sector, with a 22.6% share, emerged as the single most significant contributor, driven mainly by renewable energy projects, reflecting both the government's capex push and India's energy transition goals. Metals and metal products followed with a 17.3% share, underlining continued investment in core inputs for roads, housing, automobiles and industrial expansion.
Economists at the Bank of Baroda in the report said the skew reflects the impact of government policy rather than a broad-based private demand recovery. Lower income tax rates, GST reforms, higher public capital expenditure, and easing of interest rates have encouraged long-gestation infrastructure and heavy-industry projects, even as household consumption remains subdued.
"Investment activity is clearly responding to public capex and policy incentives, but consumer demand has yet to catch up," the report noted, adding that capacity utilisation will need to improve before private consumption-led investment gains traction.
The imbalance also has implications for employment and credit flows. While infrastructure projects boost long-term productivity, consumer-facing industries typically generate faster job creation. For now, banks and capital markets are expected to fund a large share of these capital-intensive projects, sustaining the investment cycle even as consumption lags.
Economists expect the skew to gradually correct as infrastructure spending feeds into incomes and job creation, eventually reviving consumer demand. Until then, India's investment boom remains firmly capital expenditure-led rather than consumption-driven.