India's Capex Shift: New Tech, Metals Drive Investment as Infra Trails

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AuthorAnanya Iyer|Published at:
India's Capex Shift: New Tech, Metals Drive Investment as Infra Trails
Overview

India's capital expenditure is shifting focus from traditional infrastructure to new-age sectors like electronics and data centers, alongside metals and renewables. Economists note manufacturing is driving the uptick, while services remain subdued. Government spending continues to anchor the cycle, with potential boosts for railways and defense.

Capex Shifts Gears

India's capital expenditure cycle is undergoing a significant transformation. Private investments are reviving, but the drivers have shifted considerably from previous cycles. Manufacturing and new-age sectors are spearheading this growth, while traditional infrastructure and services lag.

New Sector Dominance

Teresa John, Deputy Head of Research & Economist at Nirmal Bang, highlighted the changing landscape. Metals accounted for nearly 28% of private capex announcements in the first half of FY26. Renewables, electronics under the Production Linked Incentive (PLI) scheme, and chemicals are also attracting significant capital. However, large infrastructure projects and public-private partnership (PPP) led investments remain limited, preventing a broad-based recovery.

Manufacturing Leads the Charge

Providing a broader macro view, Sameer Narang, Head – Economics Research Group at ICICI Bank, confirmed manufacturing is clearly driving the current upturn. Services-led capex remains comparatively weak, with transportation services seeing a noticeable slowdown. Metals, chemicals, electricity, renewables, semiconductors, and electronics are showing meaningful improvement within manufacturing.

Government's Continued Role

With private infrastructure investment still muted, economists expect government spending to continue anchoring the capex cycle. Narang noted that central government capex has already risen to about 3% of GDP from 1.5% earlier. This spending is likely to grow in line with nominal GDP going forward, providing a stable foundation for investment.

Future Investment Outlook

Looking ahead to FY27, John anticipates new-age sectors such as data centers, semiconductors, and electronics will continue to attract robust investments. Metals are also expected to remain dominant, fueled by global under-investment and increasing demand from electric vehicles and artificial intelligence applications. On the government side, Narang expects railways and defence to see stronger allocations, while road spending may stabilize.

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