India's Economic Revival: Consumption Uplift to Propel Investment Surge

In an optimistic twist for India's economy, domestic consumption is poised for a robust revival, which is anticipated to fuel private investment activity from the third quarter of FY26. According to a recent EcoScope report by Motilal Oswal Financial Services, titled 'Consumption First; Private Capex Next?', this upturn is supported by recent monetary easing and regulatory reforms by the Reserve Bank of India. These measures have laid the groundwork for a significant rebound in the private capital expenditure cycle.

India has weathered various challenges, primarily geopolitical tensions and conflicts, which have culminated in foreign institutional outflows totaling USD 9 billion from July to September 2025. In response, the RBI has slashed policy rates by 100 basis points, reduced the CRR by 150 basis points, and injected about Rs 9 trillion in liquidity through diverse operations. The government has also embarked on proactive fiscal measures, including frontloading capital expenditure and reducing tax rates, leading to a notable surge in sectors like automotive, which saw a 34% increase in sales in September 2025. These economic maneuvers mark the onset of a turnaround in India's domestic growth trajectory.

The Reserve Bank has upped its GDP forecast for FY26 to 6.8%, with potential to hit 7% contingent upon favorable changes in US tariff policies. Structural growth drivers are already at play in sectors such as Power T&D, Coal, Telecom, Oil & Gas, and more, propelling capacity expansions. While India's current capex-to-GDP ratio stands at 30%, there remains substantial scope for growth. Remarkably, the ongoing capex phase is fueled not by traditional banking credit but through external funding avenues like IPOs and corporate debt, indicating a healthy private investment appetite.