New investment projects announced in India have jumped by 43% year-on-year to ₹5.5 lakh crore in the recently concluded July-September quarter of the current fiscal year. This rebound reverses four quarters of contraction and bodes well for a healthy revival in capital expenditure (capex) as the country emerges from its general elections. On a quarter-over-quarter basis, new projects have surged by 193%, reversing declines that were as dramatic as they were surprising: an 86% drop in the previous quarter.
Data from the Centre for Monitoring Indian Economy (CMIE) shows that the private sector drives this growth. New investment projects in the private sector increased by 42% to₹4.1 lakh crore, while the government sector also gained momentum, rising by 44% to₹1.4 lakh crore. Experts suggest that these numbers reflect a speedy revival in investment activity following the election lull.
However, they emphasise the significance of the low base effect—a 37% drop from last year—which has boosted the current quarter’s figures. It remains to be seen whether this post-election momentum can continue and accelerate.
The share of new investment projects from the private sector rose significantly to 75% in Q2 FY25, up from 53% in the previous quarter when companies were cautious due to the election period. This share had peaked at an all-time high of 86% for the three months ending in March last year.
This growth contrasts sharply with the trend in earlier quarters, where new project announcements had been on a downward trajectory. The peak was in Q4 FY23, with new projects totaling₹16.6 lakh crore, largely due to significant private sector initiatives worth₹14.3 trillion. This figure declined further to₹8.3 lakh crore in Q1 FY24 and eventually reached an all-time low of₹1.9 lakh crore in Q1 FY25.
While the rise in new announcements is encouraging, the alarming drop in the number of completed projects raises concerns, as it dipped by 55.3% quarter-on-quarter for two consecutive quarters. However, the value of completed projects showed slight improvement, decreasing from ₹6.2 lakh crore in Q4 FY24 to ₹3 lakh crore in Q2 FY25.
The quarter-on-quarter trend reflects an easing of pre-election nerves and a strengthening capex environment post-elections. “Q1 FY25 was rather slow, as most firms were in a wait-and-watch mode due to the elections. It appears that the momentum is continuing,” said Madan Sabnavis, Chief Economist at Bank of Baroda.
This capex rebound will undoubtedly be watched closely as the landscape for investment projects evolves, but whether such a rebound can be sustained in the coming quarters remains to be seen.