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Informist, Thursday, Mar. 6, 2025

NEW DELHI – Infrastructure spending in India--including investments from the government, states, and private sector--is likely to increase 1.6 times over the next five years to INR 90 trillion-INR 100 trillion, Crisil Intelligence said in a report released Thursday. Roads and the power sector will be the top sectors to attract capital investments, Crisil said in its India Outlook report for 2025.

"Private sector involvement in infrastructure, which has been increasing, is poised to intensify with the government's renewed emphasis on the build-operate-transfer (BOT) model in roads," the report said. "The government's National Monetisation Pipeline is also expected to play a key role in boosting private sector participation by facilitating its greater involvement in infrastructure development."

Capital expenditure in recent years has mainly been driven by the government, especially after the COVID-19 pandemic, while the private sector as a whole has refrained from making investments. While central government capital expenditure has risen substantially from the pre-pandemic average of 1.7% of GDP, it has now stabilised at 3.1% of GDP, Crisil said. 

"With the government normalising capex, it is time for the private sector to take the lead in furthering the investment momentum," Crisil Intelligence said in the report. "The ability of private corporates to invest is supported by their deleveraged balance sheets, the healthy balance sheets of lenders, and turning of the interest rate cycle."

The government's push on investments helped to revive the economy, with GDP growing 9% in two of the last three financial years. The government's second advance estimate has pegged GDP growth for the financial year 2024-25 (Apr-Mar) at 6.5%. Crisil projects GDP growth will remain steady at 6.5% in FY26 as well.

Growth next year will be supported by easing monetary policy, cooling food inflation, and government measures to boost private consumption, including from tax benefits announced in the Budget for FY26, the report said. "Growth will be steady compared with fiscal 2025 despite overall lower fiscal impulse as the government reduces its fiscal deficit target to 4.4% of GDP from the revised estimate of 4.8%," the report said.

Risks to the outlook are heightened by the increased uncertainty from the tariff war led by the US, the report said. The trade war set off by the US has also heightened risks to trade and Indian exports, Crisil said. "Thus, changes in the US tariff policy and, subsequently, retaliatory tariffs bear watching. India is vulnerable to US tariff actions as it runs a trade surplus with the country and taxes imports from there at a higher weighted average tariff rate than Washington's taxes on imports from India."  End

Reported by Shubham Rana

Edited by Rajeev Pai

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