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Informist, Thursday, Feb. 5, 2026

 

NEW DELHI – Private sector investment is on the cusp of a revival in India, after being stuck at low levels for over a decade, according to macroeconomics research firm Capital Economics. The revival in private investment, according to the firm, will allow the Indian economy to grow quicker than previously expected. 

 

Capital Economics expects India's GDP growth at 6.5% per year from 2026 to 2035, higher than the previous forecast of 6.0%. In nominal terms, India's GDP is likely to be $11.3 trillion in 2035, up from the previous projection of $10.8 trillion, Capital Economics said.

 

Private corporate investment in India has been around 10% of GDP, below most emerging market economies, Capital Economics said. While weak consumer demand is often cited as the reason for slow private capital investment, national accounts data show that private consumption growth has remained robust over the past decade, the firm said.

"Instead, a key drag on business investment has been the legacy of India's twin balance sheet problem," Shivaan Tandon, Asia economist at Capital Economics, said in a report. High corporate leverage and strains in the banking sector suppressed risk appetite and curtailed credit growth, particularly from 2015 onwards. Rigid labour laws also weighed on incentives to expand capacity and limited firms' ability to benefit from economies of scale, Tandon noted.

 

"We think conditions for the long-awaited revival in private corporate investment in India are now largely in place," Tandon said. "Corporate and bank balance sheets are in far better shape. And when the dust settles, the sweeping labour market reforms that came into effect in late 2025 should also prove supportive." The recently concluded India-US trade deal should also offer a boost to private investment, Tandon said.  End

 

US$1 = INR 90.36

 

Reported by Shubham Rana

Edited by Tanima Banerjee

 

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