Private Capex to Expand in FY27 as Rate Cuts Ignite Investment, Reports Bank of Baroda
The recent report by Bank of Baroda Economic Research highlights a broadening investment momentum expected in the financial year 2026-27 (FY27). This projection is supported by a 125 basis points repo rate cut implemented from February 2025 to March 2026, alongside tax incentives and increased government capital expenditure (capex). Gross Fixed Assets (GFA) grew by 5.8% in FY26, totaling Rs 46.7 lakh crore, down from 7.4% in FY25. Nine sectors recorded GFA growth exceeding 10%, notably led by Trading and Electricals, indicating that while overall growth moderated due to tariff-driven uncertainties, sectors related to domestic demand remained robust, setting a positive trajectory for FY27.
For the average citizen, these developments may translate to improved employment opportunities and increased availability of consumer goods as private capital expenditures in sectors like consumer durables, logistics, and retail begin to expand. The anticipated rise in disposable income due to tax cuts may boost consumer spending, particularly in retail and durable goods. Furthermore, sectors like healthcare and chemicals, which already demonstrated significant growth, could yield benefits from sustained investments, leading to better services and lower prices in the long term. However, consumers in the automobile and FMCG sectors may experience a slower uptick until demand stabilizes.
Looking towards the long-term outlook, as government initiatives continue to stimulate investment, the capital goods and infrastructure sectors are poised to receive ongoing support from public expenditure. Easing tariff uncertainties could bolster confidence in export-oriented sectors, further enhancing the economic landscape. If global trade stabilizes, industries that have remained cautious, such as textiles and agriculture, may also enter the capex cycle, potentially lifting overall investment levels above FY26’s 5.8% growth. The government’s ongoing commitment to infrastructure and capex suggests a focused approach towards fostering sustained economic growth in the medium to long term.
Source: The Hindu
(Expert Note: This report was independently prepared by the Wealthova Economy team.)