Private-sector capex tumbles for second straight quarter in Q3FY26

New government investment projects rose 26.5% quarter-on-quarter to hit ₹5.64 trillion in Q3, lifting the public sector's share of new proposals to nearly 36% from under 30% in Q2

Fresh private-sector capex plans dropped sequentially for a second straight quarter between October and December 2025 (Q3FY26), even as government projects rebounded after six months of decline to lift overall new investment plans 4.6 per cent over Q2 levels to ₹15.7 trillion, shows data from investment monitoring firm Projects Today. 

While promoters have turned cautious amid global headwinds, this suggests public capex may need to keep doing the heavylifting for longer. 

While the overall quarter-on-quarter uptick in project investments comes after a sharp 20.8 per cent decline during Q2FY26 over Q1, the downturn in new private capex plans over the last two quarters followed four successive quarters of sequential growth between Q2 of FY25 and Q1 of FY26. This marks a clear divergence in the investment momentum in the private and public sectors.

 

New government investment projects rose 26.5 per cent quarter-on-quarter to hit ₹5.64 trillion in Q3, lifting the public sector’s share of new proposals to nearly 36 per cent from under 30 per cent in Q2. Within the public sector, central government outlays jumped 39.51 percent to ₹2.89 trillion, driven by larger ticket-size announcements where average project values rose from ₹321 crore per project to ₹438 crore per project. State government agencies also accelerated new capex plans by 15.28 percent to over Rs. 2.75 trillion in Q3. 

 

In value terms, the public sector added about ₹1.18 trillion over Q2, more than offsetting a Rs. 48,669 crore fall in private investment during the quarter.

 

Fresh investment intentions in the private sector fell 4.61 per cent quarter-on-quarter in Q3, easing from a 21.83 per cent sequential contraction in Q2. However, domestic investors stepped back at a greater pace, as commitments by private Indian companies dropped 15.6 per cent to Rs. 7.76 trillion, shrinking their share to 49.4 per cent of overall fresh investments in Q3 from 61.2 per cent in Q2.  

The value of fresh private outlays decreased to ₹10.06 trillion, with the number of new private projects dipping 2.3 per cent to 1,757. Foreign investors, however, stepped in at the top end with their fresh investment surging 69.3 per cent to Rs. 2.3 trillion despite reliance on few mega AI and energy projects, lifting the foreign investors’ share to 14.7 per cent from under 10 per cent in Q2 and partly cushioning the broader private slowdown.

 

“While domestic macro conditions remain supportive, often described as a Goldilocks phase with stable demand and manageable inflation, the willingness of private promoters to commit to large new capex may remain cautious in the near term. Global headwinds, including renewed tariff-related risks, geopolitical uncertainty and a softening export environment, are likely to keep risk appetite restrained and delay final investment decisions in private-led sectors,” said Shashikant Hegde, director and CEO of Projects Today.

 

This is in contrast to the generally buoyant H1FY26 narrative, when new private sector capex plans had surged 41 per cent relative to H2 of FY25. 

 

New outlays in manufacturing, which closely tracks private sector investment appetite, declined 3.3 per cent quarter-on-quarter to Rs. 4.47 trillion with the number of projects dropping 10.2 per cent to 548. Lower announcements in traditional heavyweights like steel, cement and automobiles outweighed improved activity in select segments like pharmaceuticals, electronics and defence-related manufacturing.

 

The value of new mining projects dropped nearly 11 per cent in Q3, while electricity plans fell almost 39 per cent to Rs. 2.9 trillion from over Rs. 4.75 trillion in Q2. The electricity sector’s share in total fresh investments fell from 31.7 per cent in Q2 to 18.5 per cent in Q3, driven by a sharp slowdown in non-conventional power, especially solar and wind, even as thermal and hydel projects saw higher investment announcements.  

 

On the other hand, infrastructure projects surged 40.2 per cent to over Rs. 7.56 trillion in Q3, lifting the sector’s share in new outlays to nearly 48.2 per cent from 36 per cent, while

 

irrigation projects clocked a ten-fold rise to about Rs. 61,000 crore, albeit over a low base in the monsoon-affected Q2.

 

“The rebound in infrastructure investment announcements in Q3 is an encouraging signal and should continue to provide near-term support to overall investment momentum. However, sustaining the current economic growth requires a steadier pipeline of capacity creation in manufacturing, which depends largely on an improved flow of private investment,” Hegde pointed out, adding that public investments are likely to retain their lead in Q4FY26 as well.

 

On the expectations for the Union Budget 2026–27, the project monitoring firm’s head said that any meaningful increase in infrastructure outlays for FY27 would strengthen the visibility of project awards and front-end announcements, and could help crowd in private investment over subsequent quarters. 

 

Within infrastructure, transport services (including major gains in railways and ports), power distribution and urban and community infrastructure drove the Q3 uptick, even as roadways and real estate reported weaker sequential numbers.

 

Among the States, Andhra Pradesh overtook Maharashtra to emerge as the top destination for fresh outlays in Q3, with investments of Rs. 3.3 trillion, equivalent to a 21 per cent share in total fresh outlays, up from 19.2 per cent in Q2 this year. Odisha took the sharpest leap, jumping to the second spot with fresh outlays worth Rs. 1.79 trillion, increasing its share in the country’s new project investments to 11.4 per cent from a mere 2.3 per cent share worth Rs. 34,710 crore in Q2, when it was ranked tenth.

 

This pushed Maharashtra to the third spot in Q3, with investments of Rs. 1.56 trillion, nearly 47 per cent lower than the Rs. 2.94 trillion fresh outlays in Q2. This decreased the state’s share in new investments to 9.9 per cent in Q1 from 19.6 per cent in Q2. Gujarat, which ranked sixth among states in Q2 with Rs. 83,568 worth fresh investments, regained some ground to hit the fourth spot in Q3 with outlays of Rs. 1.25 trillion. Its overall share in new investments rose to 8.58 per cent from 5.57 per cent in Q2.

 

Karnataka, Uttar Pradesh and Kerala, which were ranked fifth, seventh and ninth, respectively, in terms of fresh investments in Q2, dropped out of the top ten States in Q3, making way for Telangana (fifth), Assam (seventh) and Chhatisgarh (ninth).