The government can’t do the heavy lifting forever: The Union budget needs to get private capex moving again

The economy appears to be on a stable footing ahead of the Union budget. Growth clocked 6.5% in 2024-25, public capital expenditure crossed ₹11 trillion, its highest share of GDP in 15 years, and inflation has largely stayed within the Reserve Bank of India’s (RBI) tolerance band.Yet, a troubling imbalance lies beneath the macro aggregates. Private capital has not responded with the breadth or momentum one would expect at India’s current stage of development.

The public sector is doing most of the heavy lifting on capex, while the private sector, despite strong balance sheets and ample liquidity, has been cautious on long-term investment.According to rating firm ICRA, over the past decade, joint-stock companies have accounted for about 35% of India’s gross fixed capital formation (GFCF). In 2023-24, this fell to a decadal low of about 33%. Among private companies, listed firms did step up capex, but their contribution is limited, accounting for barely 16% of private capex and around 5% of overall GFCF.

Unlisted firms, which form the backbone of manufacturing and employment, have largely stayed out of the investment cycle. Notably, the household sector now contributes over 40% of GFCF, driven largely by investments in real estate and unorganized ventures. The contrast is striking.

Households appear willing to commit capital to long-lived assets while corporations, evaluating 10- to 15-year industrial projects, draw more conservative conclusions about risk and return. This divergence points less to a shortage of savings than confidence. The statistics ministry’s latest survey shows that fresh private capex intentions for 2025-26 have moderated to ₹4.89 trillion from ₹6.56 trillion in 2024-25.