Government Capex Ignites A Wider Investment Cycle, Capital Formation Reaches 34 Per Cent Of GDP In Q1

New Delhi: India’s public capital expenditure push is drawing private investment, lifting capital formation, manufacturing capacity utilisation and industrial credit, Finance Minister Nirmala Sitharaman said.

Gross fixed capital formation exceeded 34 per cent of GDP during Q1 FY27 and grew 12 per cent in real terms. Manufacturing capacity utilisation increased to 75 per cent.

The Centre has raised capital expenditure beyond ₹12 lakh crore for FY27. Effective capex, including grants to states for creating assets, has crossed ₹17 lakh crore.

Sitharaman said the strategy was designed to crowd in private investment and create an economic multiplier.

Twin Balance Sheet Advantage Emerges

Resolving India’s twin balance sheet crisis has produced a “twin balance sheet advantage”, Sitharaman said. Commercial banks have liquidity to lend, while companies possess the strength to invest.

Bank credit to industry increased 19 per cent year-on-year in June 2026, indicating financing demand.

India’s free trade agreements were opening markets for labour-intensive products and services, she said, urging businesses to capture these opportunities.

Infrastructure And Digital Systems Improve

Average turnaround time at major ports has nearly halved over the past decade. The railway network is completely electrified, while freight loading reached a record 1,670 million tonnes.

India’s digital infrastructure processed average 79 crore transactions daily during August 2026, highlighting technology-enabled economic activity.

Growth Outlook Strengthens India’s Appeal

Sitharaman said reforms and rising household incomes were reshaping demand, with upward mobility expected to accelerate discretionary consumption.

India’s economy continues to grow close to 8 per cent even as global expansion remains below 3 per cent.

She also highlighted Japan Credit Rating Agency’s September 2 upgrade of India’s long-term foreign and local currency issuer ratings from BBB+ to A-, with a stable outlook. It marked India’s first A-category sovereign rating in more than 35 years.